Fingame 5.0 Case Study

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The Box Inc., where we think

Term Project: The Box Inc™

University of the West Indies, Cave Hill Campus Lauriston Streekes

Lecturer: Dr. Justin Robinson Date: 4 August, 2011

The Box Inc., where we think

2 August, 2011

MEMORANDUM
TO: Board of Directors FROM: CEO SUBJECT: Performance Report (Q1 to Q12)

The Box Inc. was established eleven quarters ago to bring a high quality product to the marketplace, filing a void for boxes made out of 100% recycled material. From the outset the aim of the organization was to maximize shareholder wealth and mould the company into a leading manufacturer of packaging material. Having been selected to lead that task, I was honored at the confidence placed in me to guide this new and energetic organization into the competitive world of business. As with all business ventures there are challenges along the way, and we at the Box Inc. had ours to face, namely a machinery fire in Quarter 5 (Q5) and industrial (strike) action in Q7. Both of these scenarios provided minor setbacks but the management team at the Box Inc. did not lose a beat, ensuring that any disruption faced had minimal effect on the organization. The results of these events also placed a toll on our financial performance and a reevaluation of the financial strategy had to be implemented. At the end of Quarter 12, I am pleased to report to the Board of Directors that the Box Inc. has met all of the challenges which came its way and was able to keep the organization in a positive growth level, while maintaining shareholder wealth at a respectable value. It was a pleasure to serve this board during the last twelve quarters and I look forward to the next twelve quarters and the exciting path that lies ahead for this organization.

Sincerely,

Lauriston Streekes
Chief Executive Officer

3
The Box Inc., where we think

A

t the end of Q12, the financial position of The Box Inc. showed a slight decline compared to previous quarter, however, plans to chart the way forward for the organizations have started.

After an analysis of the Q12 results, management thought that in hindsight, it is possible that a higher price point could have been utilized. In addition, the financial management policy of the last three quarters was reviewed and it was felt that it may have been more prudent in the long run to have reduced the payment amounts on the loans and secure additional financing to re-build the capacity. This would have been a more long-term view compared with the short-term approach that was used. This fact has been noted, and a revised medium to long term strategy for the organization is being devised. While the strategy for the last three quarters was that of moderate growth and conservative financial management with the aim of maintaining positive growth and a relative stable shareholder value, the organization’s plans for Q13 to Q16 call for a more aggressive approach. This will start with the purchase of 35,000 units of plants at a cost of $8,295,000 and the purchase of 105,000 units of machinery for $3,485,000. It should be noted that at the end of Q12, the per unit cost of plant and machinery (especially plant) has reduced, so the financial investment required, while substantial will still see the organization save around $3,000,000 compared to the plant unit prices which were in place the last few quarters. In an effort to finance these important upgrades to the physical plant, The Box Inc. will return to the credit market to secure a $10,000,000 3yr loan and a $4,000,000 bond. This raise in the debt financing will increase the principal repayment to around $2,000,000 per quarter, However, with the cash in hand and marketable securities available, the management team is confident that these transactions will be manageable once a structured re-payment plan is implemented and followed. This strategy will also increase the debt to equity ratio in favour of debt, which is a cheaper form of financing...
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