Finance Week 6 Individual Project
Working Capital Growth Simulation - Sunflower Nutraceuticals
Rebecca Hardy
FIN/571
20 October, 2014
Professor Gurpreet Atwal
Working Capital Growth Simulation - Sunflower Nutraceuticals
Sunflower Nutraceuticals (SNC) is a privately held nutraceutical company that was founded in 2006 and is located in Miami, Florida. SNC started as an internet-based, direct to customer distributor and retailer of dietary supplements. SNC offers its customers a large selection of products from more than fifty third-party brands. Since it was founded, the company has ambitiously expanded into new retail markets and launched several private-label brands. (Harvard Business Publishing, 2014)
SNC is looking into ways to grow its business while working within its working capital limits. In order to do this, SNC must maintain a minimum of $300,000.00 on hand at all times to meet its operational obligations. (Harvard Business Publishing, 2014) The following sections will outline a three phase approach to grow SNC’s business.
Phase One Phase One will require SNC to acquire a new customer, leverage their supplier discounts, tighten their accounts receivable, and drop poorly selling product lines. SNC will be taking on Atlantic Wellness as a customer, which will help the company achieve a significant increase in sales. However, this move will also create an increase in the company’s accounts receivable account and cause higher inventory balances. In order for SNC to increase its sales it has to obtain new accounts and take on new customers. The next step in Phase One will be to leverage their supplier discounts. Most suppliers are willing to offer discounts for their customers who pay for their invoices early, which decreases the number of days that they are holding their accounts receivable. SNC leverages its supplier discounts in order to decrease its accounts payable and increase its earnings before interest and tax or EBIT. SNC sells its herbal nutraceutical line to
Rebecca Hardy
FIN/571
20 October, 2014
Professor Gurpreet Atwal
Working Capital Growth Simulation - Sunflower Nutraceuticals
Sunflower Nutraceuticals (SNC) is a privately held nutraceutical company that was founded in 2006 and is located in Miami, Florida. SNC started as an internet-based, direct to customer distributor and retailer of dietary supplements. SNC offers its customers a large selection of products from more than fifty third-party brands. Since it was founded, the company has ambitiously expanded into new retail markets and launched several private-label brands. (Harvard Business Publishing, 2014)
SNC is looking into ways to grow its business while working within its working capital limits. In order to do this, SNC must maintain a minimum of $300,000.00 on hand at all times to meet its operational obligations. (Harvard Business Publishing, 2014) The following sections will outline a three phase approach to grow SNC’s business.
Phase One Phase One will require SNC to acquire a new customer, leverage their supplier discounts, tighten their accounts receivable, and drop poorly selling product lines. SNC will be taking on Atlantic Wellness as a customer, which will help the company achieve a significant increase in sales. However, this move will also create an increase in the company’s accounts receivable account and cause higher inventory balances. In order for SNC to increase its sales it has to obtain new accounts and take on new customers. The next step in Phase One will be to leverage their supplier discounts. Most suppliers are willing to offer discounts for their customers who pay for their invoices early, which decreases the number of days that they are holding their accounts receivable. SNC leverages its supplier discounts in order to decrease its accounts payable and increase its earnings before interest and tax or EBIT. SNC sells its herbal nutraceutical line to