Working Capital Simulation Managing Growth Case Study

First, the projected cash flows range from $21.2 million in 2007 to $29.5 million in 2011 as shown in the data exhibit ‘DCF model.’ To generate these numbers Liedtke’s base case performance projections are used for the projected 2007 – 2011 net revenue numbers and the estimated depreciation and then his projections for Balance sheet accounts were used to determine the current net working capital and capital expenditure as in the exhibit ‘Financial statements.’ These projections were based by Liedtke under the following assumptions, women’s casual footwear would be wound down within one year and the historical corporate overhead-revenue ratio would conform to historical averages. These annual cash flows give us a PV (Cash flows) of $96.15 million over the next 5 years.

Working capital is the key to a successful business. It is like their blood flow and the manager’s job is to help keep it flowing. Under the Generally Accepted Accounting Principles working capital is simply the difference between a company’s Current Assets, which are cash, inventory, accounts receivable and prepaid items, and Current Liabilities, accounts payable and accrued expenses.

Moving onto the income statement portion of the common-size financial statements, an increase in cash and equivalents (3.20% of total assets in 1997 to 5.97% in 2001) and receivables (2.69% of total assets in 1997 to 3.22% in 2001) coupled with a decrease in inventory signify Costco’s improving efficiency over this five year period. It is important to mention two points. First, the decrease in inventory as a percentage of total assets from 30.8% in 1997 to 27.14% in 2001 signifies an increase in the turnover rate, perhaps due to

George 's Train Shop is a family owned business that focuses on the sales and repairs of train toys. George is running a profitable business, but as he is aware of my MBA Managerial Finance class, he has asked for advice on his working capital practices. Although George is currently enjoying the benefits of a profitable business, there are opportunities for him to expand his business ventures. This first starts by dissecting degree of aggressiveness in working capital practices, current capital budgeting practices, and areas where he can improve in both arenas. In addition, careful management of the company 's cash flow will

In estimating the weighted average cost of capital, we used the cost of equity of 11.63% and the cost of debt of 2.25%. We calculated the weight of debt to be 2% and the weight of equity to be 98%. For the weight of debt we divided debt by the sum of debt and equity, and for the weight of equity we divided equity by the sum of debt and equity. Our estimated Company’s cost of capital is 11.44%, or 12%. The calculations for the cost of capital are shown in Appendix E.

Heinz has reached an unstable point in its business cycle and must calculate an appropriate cost of capital during these uncertain times. The cost of capital is an essential measure in determining the cost of a company’s capital structure. It is the

To facilitate the valuation aspect of the analysis, free-cash-flow forecasts are provided in case Exhibit 10 for Hershey as a stand-alone entity. Most students should find it easy to calculate a value for Hershey using the discounted-cash-flow (DCF) method and industry-comparable multiples, which also are provided. As with any valuation case, students must make judgments about the appropriate capital structure, the weighted average cost of capital (WACC), sales growth, and the terminal growth rate. Once students have explored the value drivers for Hershey though sensitivity analysis, they may then evaluate the bids from both Nestlé S.A.–Cadbury Schweppes PLC (NCS) and the Wm. Wrigley Jr. Company. They will want to examine whether the bids are fair from the perspective of HFC shareholders and whether the synergies assumed by the bidders in their offer prices are reasonable.

We were able to increase our EBIT by keeping our costs steady as we increased our revenue. Paying down on the credit line helped our income grow steadily over phase 3. Although our pre-tax income did increase, the lack of interest owed allowed SNC to keep more of their money at a time where they were making the most. At the end of 2021,our sales were $18,559, which is $8,559 more than when we began this process. Net income has more than doubled.

Working Capital is defined as “a measure of both a company 's efficiency and its short-term financial health. (Investopedia, 2016.)” Having an efficient working capital can make or break a business’s success. To expand on our experience with working capital, we ran the Harvard Business Publication Working Capital Simulation. In our simulation, we are co-owners of Sunflower Nutraceuticals (SNC), “an internet-based, direct-to-consumer distributor and retailer of dietary supplements, including vitamins, minerals, and herbs for women (Harvard Business Publication, 2014.)”, looking to create more working capital for the company so Sunflower Nutraceuticals can expand. We were told that SNC is breaking even with a flat annual sales growth on total revenues of $10 million. The company has struggled to finance the payroll, and more than once overdrawn on the line of credit in the past. SNC keeps the minimum amount of cash on hand ($300,000) to meet its operational needs. A national bank, Miami Dade Merchant 's Bank (MDM), has issued a line of credit with restrictive covenants; credit limit of $3,200,000, and rate of 8%. We were also provided with a forecast of the global nutraceuticals market. In 2010 the market worth was approximately $128.6 billion and forecasted to grow at a compound annual growth rate of 4.9% and reach $180.1 billion by 2017 (Harvard Business Publication, 2014.). After being given all of this information, it was up to us to make

The Harvard Business Simulation asked that one act as the C.E.O. of Sunflower Nutraceuticals (which will be referred to as SNC throughout this paper). Within the simulation there were phase in which decisions were made to help SNC with the growth of the company. This paper will explain the decisions made will influence SNC to estimate the value of the company, the working capital of the company, and evaluate the general affects associated with the limited access of financial mix.

Analysing the historical values of the operating margins from the Income Statement, we forecast values for the 2007-2009 period. The executives of BKI expect the firm to achieve operating margins at least as high as the historical ones. Thus, we took averages and slightly adjusted them toward higher values. Since the declining tendency in the last three years was cause by integration costs and inventory write-downs associated with acquisitions, which already have been completed. To the EBIT, estimated by using those margins, subtract the taxes, Capex, adjust for Depreciation, Amortization and change in Working capital. The capital expenditures were just over $10m on average per year. The company is expecting the Capex remain modest. Thus, we assumed a Capex of $10m for the next three years. We estimated Net Working Capital by using the average ratio of NWC/Net income of the last three years.

Combined they show a significant increase in EBIT with a lower increase in WCR. Although we foresee a significant increase in WCR we feel that the credit line we have and the amount of capital we freed from phase would be sufficient to reduce the impact of the additional WCR.

The purpose of this assignment is to study the finance sources available to a company. Here according to the assignment requirement, we have to select a British public company to study the available sources of finance from where the firm collects its capital requirement. Following the guidelines we have to analyze various sources with their potentiality and then we make viable analysis of Cash and sales budget. Here some salient financial ratios are employed for the purpose of analyzing the financial statement of the company.

In this paper I’ll analyze the fundamental differences between the working capital structures and components for Google and Oracle, and speculate upon the main reasons why such differences exist; how each company could improve its working capital positions. As a Wall Street Analyst who has to recommend one of the companies as an investment to a company’s clients; based solely on that company’s working capital; as an Investment Banker who has to recommend loaning a substantial amount of capital to one company based solely on that company’s working capital.

BBC Pvt. Ltd, is a chemical manufacturing company that was established in 2004. It's registered offices are in Bangalore, and its manufacturing is in Lucknow. At the time of the case BBC is in need of working capital to secure a major contract with Indian Railways. The contract would open doors for long term business. BBC's product manufacturing required minimal fixed assets investment and high quality production. Their product was low cost high quality which