Tessellate Is Profitable and Nearly Out of Cash
Finance
medium30 min0 submissionsAmazon
Scenario
Tessellate is a developer tools business in US. Last year it reported $123 M of revenue, a gross margin of 39%, and a net profit margin of 5% — its third consecutive profitable year.
The CEO is baffled. The company has $9 M in the bank, has drawn $48 M of its overdraft facility, and has twice delayed supplier payments this quarter.
Balance sheet metrics:
- Days sales outstanding: 75 days
- Days inventory outstanding: 54 days
- Days payables outstanding: 46 days
Revenue grew 18% last year, and the sales team is targeting similar growth again.
Supporting data
liquidity
- cash m
- 9
- overdraft drawn m
- 48
working capital
- days sales outstanding
- 75
- days payables outstanding
- 46
- cash conversion cycle days
- 83
- days inventory outstanding
- 54
income statement
- revenue m
- 123
- net margin pct
- 5
- gross margin pct
- 39
- revenue growth pct
- 18
Your task
Explain to the CEO what is happening and what to do about it. Provide:
- Analysis — why a profitable company is short of cash.
- Risks — what happens if nothing changes.
- Recommendation — the specific actions you would take, in priority order.
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How you'll be graded
100 points, 60% to pass.
- diagnosis30
- recommendation25
- risk assessment15
- financial analysis30
Hint
Reveal suggested structure
- Cash conversion cycle = DSO + DIO − DPO = 75 + 54 − 46 = 83 days.
- Cash tied up ≈ (CCC ÷ 365) × revenue.
- Growth makes it worse — every extra unit of revenue funds more receivables and inventory before it produces cash.
- Levers, in order of speed: collections, inventory, payment terms.
- Quantify the cash released by improving each lever.