In this assignment, you will be running a simulation of a company’s growth, and managing its working capital. You will need to make decisions about accounts receivable and inventory, in order to ensure that the company has enough cash on hand to cover its expenses.
You will start with a certain amount of cash on hand, and then each turn, you will need to decide how much to spend on accounts receivable and inventory. You will also need to make decisions about how much to sell each product for.
At the end of each turn, you will see how much cash you have on hand, and whether or not you are able to meet your expenses. If you are not able to meet your expenses, you will need to take out a loan, which will accrue interest.
You will want to try to keep your working capital positive, so that you are not taking out too many loans. However, you also need to grow your business, so you will need to strike a balance between the two.
Within the Harvard Business Simulations, one must play the part of the C.E.O. of Sunflower Nutraceuticals (which will be referred to as SNC throughout this paper). There were phases in which decisions had to be made in order for SNC to develop its business. This paper will explain the decisions made and their influence on SNC’s valuation, working capital, and overall financial consequences related to limited access of financial mix.
The first phase of the Harvard Business Simulation dealt with two main objectives: to set up SNC’s business model and operations, and to establish a presence in the marketplace. The second phase focused on growth opportunities while minimizing risks. The third phase was all about increasing shareholder value by maximizing revenue and profitability.
The working capital decisions made during the simulation had an immediate and significant impact on SNC’s financial statements. For example, when SNC decided to increase inventory levels, accounts receivable also increased. This meant that more cash was tied up in working capital, which impacted SNC’s cash flow and profitability.
In terms of estimating the value of the company, it is important to consider all aspects of the business, including working capital. For example, if SNC decides to invest in new inventory, this will have an impact on the company’s valuation. However, if SNC is able to manage its working capital effectively, this will also have a positive impact on the company’s value.
The limited access to financial mix can have a number of different impacts on a company. For example, it can limit the ability to finance growth opportunities or make necessary investments. Additionally, it can lead to higher interest rates and increased borrowing costs.
Overall, the decisions made during the working capital simulation had a direct and immediate impact on SNC’s financial statements and valuation. It is important to consider all aspects of the business when making decisions, as each decision can have a ripple effect on other areas of the company. Additionally, access to financial mix can be a limiting factor for companies, so it is important to consider this when making decisions about investments and growth opportunities.
SNC is a dietary supplement manufacturer and distributor that is privately owned. The organization has a distribution system that includes direct consumer sales, wholesale vendor sales, and retail store purchases. SNC was established in 2006 as an internet firm. A retail outlet shop was soon opened by the firm, which also sold private labeled goods.
The company has experienced significant growth and profitability since its inception. For the past two years, SNC has been in a period of rapid growth. The company has invested heavily in inventory and accounts receivable to support this growth. As a result, working capital requirements have increased significantly. The company’s current working capital management strategy is to maintain a minimum level of cash on hand, and to finance all other working capital needs with short-term debt.
The company’s goal is to continue its rapid growth while maintaining profitability and minimizing the risk of defaulting on its debt obligations. To achieve this goal, SNC must effectively manage its Working Capital.
Working Capital refers to the short-term assets and liabilities that a company uses to finance its operations. Examples of short-term assets include cash, accounts receivable, and inventory. Short-term liabilities include accounts payable, accrued expenses, and short-term debt.
To manage Working Capital effectively, a company must have a clear understanding of its short-term asset and liability balances. The goal is to ensure that the company has enough cash on hand to meet its obligations, while also maximizing the use of its short-term assets to generate profits.
There are several techniques that can be used to manage Working Capital. One common approach is to keep a minimum level of cash on hand, and to finance all other working capital needs with short-term debt. This approach has the advantage of minimizing interest costs, but it also carries the risk of default if the company is unable to repay its debts when they come due.
Another approach is to finance Working Capital with a mix of short-term debt and equity. This approach has the advantage of providing more flexibility in terms of how the company can use its short-term assets, but it also carries the risk that the company will be unable to generate enough profits to cover its interest payments.
The third approach is to use only equity to finance Working Capital. This approach has the advantage of being less risky than debt financing, but it also means that the company will have to give up a portion of its ownership stake in exchange for funding.
The company has been unable to make a profit since it started, which is because it’s a small nutraceutical firm with lots of potential. This has forced SNC to go over its $1 million credit limit several times throughout the years in order to pay employees and other operational costs. SNC only has limited financial choices, such as growing and diversifying through barely any use of working capital (10% or less).
The purpose of this simulation is to provide you with an opportunity to manage the growth of SNC by making sound financial decisions that will lead to improved working capital management and ultimately profitability. You will be faced with a number of challenges that will test your ability to make tough choices in order to keep the company afloat. In the end, it will be up to you to determine whether or not SNC will be able to achieve sustainable growth and profitability.