Capstan Autos

Introduction

Capstan Autos operates an East Coast dealership for a major Japanese car manufacturer. Capstan's owner, Sidney Capstan, attributed much of the business's success to it's competitive pricing policy and immediate cash payment. The cars are imported at the beginning of each quarter and paid the manufacturer at the end of the quarter. The revenue from the sales are used to pay the manufacturer and the expenses of running the business.

During this time the company had offered a new policy of six months free credit and it was proving that sufficiently popular that Sidney Capstan decided to maintain the policy. In the third quarter of 2010 sales had recovered to 225 units; by the fourth quarter they were 250 units; and by the first quarter of the next year they had reached 275 units. It looked as if by the second quarter of 2011 the company could expect to sell 300 cars. Earnings before interest and tax were already in excess of their previous high, and Sidney Capstan was able to congratulate himself on weathering what looked to be a tricky period. Over