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Foundation Broad Cost Leader

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FOUNDATION® BROAD COST LEADER This practice exercise will help you understand the relationships between business strategy, tactics, functional alignment, and the Foundation® simulation. We will use the Chester Company for this example. (During the practice rounds, each company is assigned a different strategy.) You will execute your plan by inputting the decisions described below. At the same time, your competitors will execute their assigned plans. The practice exercise will take three rounds As each round is processed, you will evaluate the results and then input the next round’s assigned decisions. Upon completion of the practice rounds, the simulation will be reset to the beginning. You can then create and implement your own …show more content…

Under the rules, a new project can only begin on January 1st. If a project does not complete before the end of this year, you cannot begin follow-up project next year. Finance Round 1 Your fiscal policies should maintain adequate working capital reserves to avoid a liquidity crisis. Working capital can be thought of as the money that you need to operate day-to-day. In Foundation® working capital is current assets (cash + accounts receivable + inventory) - current liabilities (accounts payable + current debt). If you run out of cash because your sales are unexpectedly weak, an Emergency Loan will be issued. Here are some guidelines to help you avoid an Emergency Loan. Your proforma balance sheet predicts your financial condition at the end of this year. Make conservative sales forecasts. Do not rely on the computer prediction. Override it with a forecast of your own. If you are conservative, it is unlikely that your worst expectations will be exceeded. Next, build additional inventory beyond your conservative expectations. This forces your proforma balance sheet to predict a future where your sales forecast comes true and you are left with inventory. (If you sell the inventory, that’s wonderful.) On the Finance spreadsheet, issue stock, bonds or current debt until the December 31 Cash Position for the upcoming year equals at least five percent of your assets, as displayed on the

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