La Maison Maison Case
Essay Preview: La Maison Maison Case
Report this essay
DecisionAs Brad MacDoungall, I have decided to deny DesRocher’s long-term loan request of $4000000. Firstly,in such a low-margin,competitive industry,it is extremely tough to bounce back from significant losses,which LMM will inevitably face next year. Next, in the upcoming years LMM will have serious issues managing their short-term debt,as they have reached their limits on their WCL and have fewer current assets to rely on than previous years. These cash problems are the second major reason I have recommended to deny the loan. Lastly, strategically speaking, I believe this is to be a bad move. A move of this magnitude needs to be given more time,and more thought than what DesRocher has put in.Tough industry to bounce backLMM operates in an extremely competitive industry with customers who constantly apply pressure on wholesalers to lower prices. This is results in a very low-margin industry that leaves little to no room for error in terms of cost control. Unfortunately,LMM has learned this the hard way with their loss of a large account,leading a future loss of $600,000. This big of a hit could take many years to recover from,and makes me think that it would be safest for LMM to stray away from large investments that could worsen their situation. Instead,LMM would be better off focusing on lowering its operating costs such as COGS and perhaps bringing bonuses closer to the industry average so it can take home a larger percentage of its sales as profits.

Cash problemsAlthough LMM has found ways to keep their company afloat in the past,they have consistently failed to do so in a sustainable manner,a trend that I believe will continue on into the future. In 2011 they relied extremely heavily on their working capital loan,increasing it by over $1.8 million and to within $200k of their limit. In 2012,they were able to sustain their company through collecting all of their $741k in note receivable. Now,they have nearly reached their working capital limit and there are no more note receivable left to collect, raising significant future cash and liquidity concerns. Theses concerns are highlighted by LMM’s future working capital loan needs which extend to over a million dollars above their limits and a future acid test ratio of 0.5:1. Considering that it will be my bank extending this loan, I am simply not willing to invest upwards of $8.5 million into this company while their current financial position.Poor strategic DecisionMy decision to deny the loans is not completely based off a lack of confidence in LMM itself. Based off their above-average sales growth figures and experienced management I do believe there is a chance that LMM can bounce back from their recent financial woes. However,I do not believe that moving everything into a new building and adding a showroom,all in one month are the way to do it,or even operationally feasible. My bank currently has over 3 million dollars loaned to LMM and I believe the best to keep that money safe is for LMM to wait until the company has stabilized financially. The last thing that LMM wants to do is to take on a massive project like moving into a new building,and overwhelm its operations. This could lead to problems getting its springs and summer collections to its customers and cause further deterioration to their sales. I believe that this company needs to focus on its core operations for now. Until it becomes profitable again.

Get Your Essay

Cite this page

Upcoming Years Lmm And Desrocher’S Long-Term Loan Request. (April 3, 2021). Retrieved from