CEO of Sunflower Nutraceuticals (SNC)
Acting as the CEO of a small company, you will apply the principles of capital budgeting to invest in growth and cash flow improvement opportunities in three phases over 10 simulated years. Each opportunity has a unique financial profile and you must analyze the effects on working capital. Examples of opportunities include taking on new customers, capitalizing on supplier discounts, and reducing inventory.
You must understand how the income statement, balance sheet, and statement of cash flows are interconnected and be able to analyze forecasted financial information to consider possible effects of each opportunity on the firm's financial position. The company operates on thin margins with a
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Free cash flow: The overall free cash flow of the company before the implementation of Phase 1 decision was not good. By implementing this decision only the top line of the financial statement has improved and net income remained flat which indicates about the less free cash flow generating capacity of the company (venturelabinternational.com). Overall free cash flow of the company continues to be average in this Phase.
Total value: The total value will decrease by $225,000 after the implementation of this decision. Apart from sales, there is no improvement in any aspect of the business, like no change in the accounts receivables, payables and cash cycle. They remain the same as before which has affected the cash flow of the business.
In this phase the management should arrange for short-term cash loan for meeting up the increasing demand, the sales has increased which directly increased the consumption of raw materials and suppliers cost. In this phase the supplier are paid in 41 days whereas sales are collected after 110 days which beings a huge gap between collection and repayment. Actually two times the suppliers has to be paid before collecting the sales. This increases the working capital requirement of the company in order to meet the payment obligations and about 30% of sales are in credit.
Phase 2: Pursue Big Box Distribution:
After the acquisition of new
In accounting there is much to be learned, about the financial aspects of a business. In the past five weeks I have learned the importance of financial reports and how they relate to the success of an establishment. These reports may include balance sheets and income statements, which help accountants and the public grasp the overall financial condition of a company. The information in these reports is really significant to, managers, owners, employees, and investors. Managers of a business can take and deduce financial
Reduced inventory by 1.8 million pair. Based on the COGS of 45%, this could mean a reduction in inventory of close to $10M.
SUMMARY OF STUDY OBJECTIVES 1Identify the sections of a classified balance sheet. In a classified balance sheet, companies classify assets as current assets; long-term investments; property, plant, and equipment; and intangibles. They classify liabilities as either current or long-term. A stockholders' equity section shows common stock and retained earnings. 2Identify and compute ratios for analyzing a company's profitability. Profitability ratios, such as earnings per share (EPS), measure aspects of the operating success of a company for a given period of time. 3Explain the relationship between a retained earnings statement
This course focuses on ways in which financial statements reflect business operations and emphasizes use of financial statements in the decision-making process. The course encompasses all business forms and various sectors such as merchandising, manufacturing and service. Students make extensive use of spreadsheet applications to analyze accounting records and financial statements. Prerequisites: COMP100 and MATH114 / 4-4
Although the company seems to be profitable, it has faced shortage of cash. It happened due to increase in Accounts Receivable as well as Inventories. On the other hand, Accounts Payable does not increase that rapidly and difficulties regarding cash collection become evident. Furthermore, the cash collection cycle becomes larger (59 days in year 2003, while more than 70 in year 2006).
This signals that although company is profitable but the retained earnings are not enough to fuel the exponential growth of the company. Payable period increased from 35 days in 1989 to 45 days in 1990(Exhibit 2), which shows that the company is lagging behind the standard due date of 30 days. This sole dependency on accounts payable for the uses of cash will make the situation worse. Therefore for additional inventory and accounts receivable to sustain the growth company needs external financing from the bank.
In order to ascertain how well a company is performing, analyses must be done in regard to the business being stable, including its’ ability to pay debts, how much cash or other liquid assets are available, and whether the organization is viable enough to continue operations. These analyses typically look at income statements, balance sheets, and statements of cash flow, where current and past performance will be studied with the goal of predicting how the company will perform in the future.
Users are likely interested in information that will assess the company's liquidity, solvency, risk and return, etc. Therefore, they can know more about how is the company financed and the availability of cash to pay debt from the balance sheet. They can know exactly about allocation of the use of cash for different activities from the statement of cash flows. Income statement will provide the information about the revenues and expenses of the company. They can also access information associated with dividend paid and retained earnings.
Our class was assigned a company for financial scrutiny and to obtain financial statements (Balance Sheet, Income Statement, and Cash Flow Statement), from the company’s most recent Annual Report. We are to prepare a written analysis of the organization with the following requirements:
Overall: the trend in this company (CVS) has been slightly increased from 2014 to 2015 as the value of income operating decreases while total revenue increases. This can be illustrated that the company has been addressed the issue. Also, if the company can decrease the surplus inventory, the pharmacy or whoever operates it can get bonus as an
In each of these alternatives notice both negative cash flow and negative NPV. What a manager views these performances there seems to be returns less than the cost of capital therefore investor’s value are whipped out.
Sunflower Nutraceuticals (SNC) is a Miami, Florida-based distributor that offers dietary supplements. These supplements vary from vitamins, minerals and herbs for women of all age groups. The supplements are offered through an SNC Website and Catalog (Harvard Business Publishing, 2014). SNC offers more than 50 third party brands referred to as their stock keeping units (SKUs). Since their initial launch in the year 2006, they have developed a private label brand for sports drinks, metabolism-boosting power as well as a vitamin line for teenage girls (Harvard Business Publishing, 2014).
As a Chief Financial Officer, I have paid certain attention to analyze the balance sheet and the income statement to interpret the business and highlight major strengths and weaknesses while offering some explanation for observed changes.
Balance sheets and income statements are a snapshot of a company’s stability and financial situation. Combined the statements show the income, expenses, and stockholder’s equity in the company. These statements are often analyzed by financial institutions when a company comes to them needing a loan. Stockholders and other investors also look at these statements to make sure their investment will return a profit for them. This paper will look at four different companies and their balance sheets and income statements. The companies are Eastman Chemical Company, Covenant Transportation
Capital budgeting is the most important management tool that enables managers of the organization to select the investment option that yields comprehensive cash flows and rate of return. For managers availability of capital whether in form of debt or equity is very limited and thus it become imperative for them to invest their limited and most important resource in perfect option that could prove to beneficial for the organization in the long run (Hickman et al, 2013). However, while using capital budgeting tool managers must understand its quantitative and qualitative considerations that are discussed below.