Conclusion
The Rondo Company's overall performance is below the industry average but has potential and can turn around their operations and regain investor confidence by improving performance in a few key areas such as inventory management. Rondo manages their debt very well (see Chart # 2 below) but how assets are managed needs significant improvement.
The projected decline in property, plant, and equipment may hurt Rondo and contribute to overall inefficiencies. Sales over the next six-years will grow but profits will not. Rondo's costs are projected to be very high and must be reduced. In addition, inventory turns are projected to degrade and inventory reduction strategies need to be investigated. A major problem for Rondo is the number of days it takes to collect accounts receivable. Significant focus is required in this area to free up cash, which can then be used to invest in property, plant, and equipment. These problems areas contribute significantly to an inefficient operation. This inefficiency inhibits profitability at Rondo and may led to a loss of investor confidence.
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