Working Capital Simulation 2

1849 Words Jan 10th, 2015 8 Pages
Working Capital Simulation
Richard Hughes
FIN/571
January Nineteenth, 2015
William Stokes

Working Capital Simulation

Sunflower Nutraceuticals (SNC) is barely breaking even and is strategizing on methods improve its growth and cash flow through capital budgeting. This paper will discuss the decisions the CEO made in each area of the 3-phase process, and evaluate how the decisions affected SNC. The numbers in this analysis are in thousands. Background SNC provides dietary supplements to individual customers and distributors. The company currently is only able to keep the minimum required cash on hand to run the business’ operations, and have had problems making payroll recently. The company and the nutraceuticals industry are
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Between the 2 phases, our stockholder equity increased from $2,772 to $4,153 Phase 3
SNC wants to build off the momentum gained in phase 2 by further expanding their brand to reach the international markets. Mega –Mart has helped SNC become a national household name, so we would like to become an international competitor. Applying a global strategy will increase our revenue and our EBIT and allow us to keep our costs flat by contracting with international suppliers. At this stage in our business cycle, we are interested in maintaining steady growth, retaining as much of our earnings as possible and paying down our credit lines to lower our interest expense.
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. Conclusion
SNC’s overall strategy of market penetration and being paid quicker turned out to be very successful for a company who could not make payroll at one point. We have become a global leader in our relatively new field and we took advantage of all opportunities to grow. We became less reliant on credit and increased our net worth. The overall
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