Case 16 Reed’s Clothier Inc James Jackson University of Phoenix Finance for Business FIN 370 Mr. Arnold Harvey July 21, 2010 Case 16 Reed’s Clothier Inc Reed’s Clothiers was founded by Jim Reed in 1934 when Jim retired from the military. Over the years, the business grew, netting over $800,000 by 1976. Jim Reed then decided to retire and handed over the family business to his son, Jim Reed II. The younger Jim then decided to buy a building in a prime area in downtown Lexington, creating
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Case 16: REED’S CLOTHIER, INC.: WORKING CAPITAL POLICY As Jim Reed slowly walked the two blocks between the bank and his store, he knew his business was in serious financial trouble once he talked to his new banker, Holmes. He knew that there was something that had to be done to regain control. He had everything going wrong from the inventory being too much to the accounts receivables not being paid on time which were causing him not to be able to raise the cash required to meet its financial
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Reeds Clothier is a clothing store that has been around since 1936. It was founded by Jim Reed an ex military man from VMI (Virginia Military Institute). The majority of his customers were from VMI and his banking officer was too. I believe that these cozy relationships might have been the cause of the financial distress that occurred in this case. Jim's banking officer was lenient, because he was a friend. Jim had adopted a loose working capital policy with higher current assets than industry averages
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