Cash flow problems at Borders
Recommend on Google+
Borders booksellers are trying to preserve cash and have taken the fairly desperate step of delaying payments to their suppliers (book publishers). The stock market has responded with heavy selling of Borders shares, pushing down the firm’s value by 15%.
Borders benefits from vendor finance, by which suppliers provide the retailer with books for sale in its stores well in advance of receiving payment.
According to the BBC the company has been left short of money after it began to run short of credit – partly because it has been successful in reducing the amount of stock it currently holds. But without new credit facilities becoming available the second largest bookseller in the US said it could face a liquidity shortfall. The firm might run out of cash in as little as three months.
Next steps might include liquidation of fixed assets - closing down certain stores to improve its position. Borders have already sold its UK business in June 2007 to a private equity group, which went into administration in 2009.
Clearly a tough year ahead for a firm competing with Barnes and Noble, Amazon, Target, supermarket chains and the upheaval generated by the shift to more e-publishing.
blog comments powered by Disqus
BUSINESS TEACHER RESOURCE NEWSLETTER
Get first news of business teaching resources, ideas and other materials from tutor2u. Over 9,400 business teachers from the UK and around the world receive our regular teacher email newsletters. Sign up for free here!
