United Grain Growers Essay

1061 Words May 6th, 2015 5 Pages
United Grain Growers Limited

Bharat Gutta

1. UGC estimated that it would need C$150 million to carry out its strategic plans over the coming two years. Will its internal resources provide reliable funding for this program? How much external funding might it need? The company needs to spend C$150 million, which covers the installation of high-throughput elevators (7 or 8 more at $9 million each) and the upgrades of 15 elevators at $3 million each. The rest of the money is needed for the funding of the expansion of Crop Protection Services and Livestock services division.

If we look at the income statement of the company and also the balance sheet and cash flows, we notice that UGG has a negative cash flow for 1998. This means that
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In the historical balance sheet we can see a very important decrease of the short-term debt, so UGC could also increase this debt. Obtaining cash from the stock market, negotiate an increase of the number of days of the accounts payables, reducing inventory or decreasing the number of days in their accounts receivable could also be very important cash resources. Still, it is difficult to estimate the financial need due to the fact that we cannot forecast the cash from operations.

2) 2a) Like most firms, UGC faces a variety of risks. How could they be categorised? What elements of the business (examples: revenues, investment needs, etc ) might be affected by weather risk or environmental liability, and how? In general the risks are divided into three categories, the business related, political and environmental risks. All those risks have an impact on the incomes of one company. The Risk consulting division of Willis Carroon came to the conclusion that greatest risk was the impact of the weather on the size of the harvest. Every ten years, UGC might face adverse weather

United Grain Growers Limited that could reduce after-tax profits by as much as 11 million dollars, or about 70% of its 1998 earnings.

Bharat Gutta

The weather has an impact on the procurement of grains and makes it very volatile. In 1990 a poor harvest contributed to low inventories and sales volume. Willis