Solution Flash Memory Inc
1. Background of Flash Memory. Inc
Flash memory was founded in San Jose, California in the late 1990s. In 2010, there are six individuals held the top management positions, comprised the board of directors, and owned the entire equity in the firm.Flash specialized in the design and manufacture of solid state drives (SSDs)and memory modules which comprised the fastest growing segment in the overall memory industry.
SSDS market is huge and intensely competitive which reflects in product offerings, high rivalry, and low profit margins as a percent of sales. Flash’s competitions include
Intel, Samsung, Micron Technology, etc. Due to theproducts ‘characteristic and stiff competitors, its sales life cycle is short, usually only six years. In order to fix this risk,
Flash aggressively spent on research and development to improve its existing product lines and add new ones. Flash believed the reputation of their products was one of its key competitive advantages and decided to maintain this reputation.
Flash had used notes payable obtained from the company’s commercial bank, and the bank was willing to lend up to 70% of the face value of receivables. With the development of company, Flash’s sales increased rapidly which means there required a large increase in working capital, internal cash flow had not been sufficient to fund this increase in receivables and inventories. So Flash hopes bank to lend up to 90% of a company’s existing accounts receivable balances. The price of higher lending is higher interest rate: increase from prime +4% to prime plus 6% on the total outstanding loan balance to Flash, based off the May 2010 prime rate of 3.25%.
2. Problem Statement
Brown, the CFO of Flash, faces an investment opportunity. It is a major new product line, which was expected to have a significant impact on the company’s sales, profits, and cash flows. The product was believed to be superior to existing memory products, and would therefore command gross margins of 21%
Flash memory was founded in San Jose, California in the late 1990s. In 2010, there are six individuals held the top management positions, comprised the board of directors, and owned the entire equity in the firm.Flash specialized in the design and manufacture of solid state drives (SSDs)and memory modules which comprised the fastest growing segment in the overall memory industry.
SSDS market is huge and intensely competitive which reflects in product offerings, high rivalry, and low profit margins as a percent of sales. Flash’s competitions include
Intel, Samsung, Micron Technology, etc. Due to theproducts ‘characteristic and stiff competitors, its sales life cycle is short, usually only six years. In order to fix this risk,
Flash aggressively spent on research and development to improve its existing product lines and add new ones. Flash believed the reputation of their products was one of its key competitive advantages and decided to maintain this reputation.
Flash had used notes payable obtained from the company’s commercial bank, and the bank was willing to lend up to 70% of the face value of receivables. With the development of company, Flash’s sales increased rapidly which means there required a large increase in working capital, internal cash flow had not been sufficient to fund this increase in receivables and inventories. So Flash hopes bank to lend up to 90% of a company’s existing accounts receivable balances. The price of higher lending is higher interest rate: increase from prime +4% to prime plus 6% on the total outstanding loan balance to Flash, based off the May 2010 prime rate of 3.25%.
2. Problem Statement
Brown, the CFO of Flash, faces an investment opportunity. It is a major new product line, which was expected to have a significant impact on the company’s sales, profits, and cash flows. The product was believed to be superior to existing memory products, and would therefore command gross margins of 21%