Westlake Lanes Case Analysis
Westlake Lanes is a bowling alley founded by Dane Sugar, who died in 2008. The company was profitable but has been loss since 2004. In May 2009, the grandson of Dane Sugar, Shelby Givens, acquired the position as the general manager in Westlake Lanes. And 9 months later, the company first recovered to be profitable after 2007.
Even though Westlake Lanes became profitable in March 2010, it cannot repay its loan in short future. Therefore, the problem is
i. Could Shelby Givens persuade the board members to continue invest on the business? ii. And if so, what should Westlake Lanes do to capture the opportunities in the future?
i. Health insurance
i. Fast economic growth in Raleigh …show more content…
The Sales has been decreasing since 2004 and the Net Income has become negative since 2007. ii. The debt-equity ratio is very unstable, and climbed to 4.56 in 2007 and 3.35 in 2009, which shows the company significantly relied on borrowing money, mainly from its board members. Therefore the decision of whether and when to ask for the loan to be repaid is vital to run the business, unless Westlake Lanes could find another financing method. iii. The quick ratio declined from 2.38, which is a healthy level, to 0.30 in 2009, which shows Westlake Lanes cannot meet its short-term liabilities and it cannot afford its daily operation. iv. Current ratio, as well, proves the poor liquidity performance of the company. As a result, the company may be forced to bankrupt if it cannot meet these short-term liabilities.
v. As the company’s expense on equipment maintenance keeps rising, and the poor management through 2006, the Asset Turnover ratio has been dramatically decreased from 7.84 to 3.07. However, an asset turnover ratio of 3.07 is still good for a company, but if the trend still continues, the disaster will soon take …show more content…
During the 9 months, the current general manager has shown his ability and willingness to run the business. Therefore I recommend the board to accept alternative ii. As indicated, the customer base is very critical for the company to survive, and recent years, an increasing number of young high-technology base professionals come to the region. Therefore it is highly recommended to focus on these high-income youths instead of being conservative and targeting on families with kids. The high revenue from the project will help to repay the loans quicker, and as long as the manager knows the need of the youths, the risk is lower than expected. In words, alternative ii is medium risk but with high