Reference no: EM133239865

Self-Reflection

David Garza retired at age 48, courtesy of a very healthy stock market and numerous stock options he had been granted while president of tiendas.com, an Internet start-up company. He soon moved to Chile to follow his dream of living by the sea. Garza, always the entrepreneur, began a sporting-goods store shortly after relocating. The single store soon grew to a chain of four outlets throughout the state.

Although business has been profitable, the chain did have its share of problems. Store traffic was somewhat seasonal, with a slowdown occurring as winter approached. Garza therefore added ski equipment and accessories to his product line. The need to finance required inventories, which seemed to be bulging, left cash balances at very low levels, occasionally giving rise to short-term bank loans.

Part of the operation focused on canoe building and white water rafting trips. Reports from the company's financial accounting system seemed to indicate that these operations were losing money because of increasing costs, although Garza cannot be sure. "The traditional income statement is not too useful in assessing the problem," he noted. "Also, my gut feeling is that we are not dealing with the best suppliers in terms of quality goods, delivery, reliability, and prices." Additional complications were caused by an increasingly competitive marketplace, with many former customers now buying merchandise and booking river excursions via the Internet.

Garza's background is marketing, and he appeared somewhat puzzled to proceed. The company's CFO would be an obvious asset in terms of addressing these problems. Unfortunately, she knew her number but lacked key knowledge of general business operations. The same could be said for other executives who managed somewhat in "silos", becoming experts in a narrow facet of the company but, in general, lacking big-picture outlook for the firm.

Required:

1. Explain how the CFO and managerial accounting could assist Garza in addressing the company's problems.

2. Does e-commerce appear to be a viable option for the firm? Explain, citing the difference between business-to-consumer and business-to-business channels. Which of the following two channels, if any, would you recommend? Why?