pro forma

Topics: Accounts receivable, Balance sheet, Revenue Pages: 6 (954 words) Published: October 20, 2014


Working Capital Simulation: Managing Growth Assigment University of Phoenix
Dillian Rivera
FIN/571 CORPORATE FINANCE
September 30, 2014
Dr. Jose Berrios Lugo

Working Capital Simulation: Managing Growth Assignment

Sunflower Nutraceutical (SNC) is a distributor in the Miami, Florida area is a privately

owned company. Sunflower Nutraceutical is a business that started as a direct –to-consumer

distributor and retailer in products related to supplements that include vitamins, minerals and

herbs for women, and all ages. This company has successfully and ambitiously expanded their

business and SNC continues to operate and desires to expand their business to plans to operate

and expand their market and product line. SNC has continue to have a break even in sales growth

and annual revenues.

It is the goal of SNC and to advise them in terms of investing for growth and cash flow

improvement opportunities. The purpose is to assist the decision making process through the

phases 1 to 3 on opportunities such as taking on new customers, capitalizing on supplier

discounts and reducing the inventory. This may position SNC in a more lucrative financial

positions. SNC has currently expanded into launching several private label brands “Although

health food companies have been around for ages providing such products, this is new for SNC.

Research shows that the target audience for the company to thrive in industry growth will be

“increase in the elderly population, the rate of growth in chronic diseases, and the relative

affluence of the working population, and increasing societal awareness of preventative

medicine.”

For SNC entering into this new market will be monumental step for the entity to posiblly

succeed in growth and increased revenues. Looking at the comparative Balance Sheet, the

accounts receivables have been declining from 2010-2012. The Income Statement shows that

sales have been consistent the cost of sales has shifted causing the EBIT to drop in 2011

and to rise in 2012.

Acting as CEO in the first phase of the new business opportunity, SNC has the position to

increase the net income and the working capital. (See Balance Sheet and Income Statement). For the

first phase, phase 1 SNC encounter the decision to include a new client Atlantic Wellness. When

working around this decision of incorporating the new customer the sales increased significantly

but at the same time the accounts receivables and inventory balances increased. After reviewing

how the numbers for SNC will be affected if the incorporate Atlantic Wellness this leads to

decline the decision of to decline the Super Sports Center due to the fact that it will affect the

account receivables. By declining the Super Sports Center will improve the account receivable

and improve the cash flow due to the fact that increases the accounts receivables and the

inventory balances and in return it decreases the cash flow because it increases the EBIT

earnings before interest taxes partially offset by increased EBIT due to the favorable contract

negotiated with Ayurveda Naturals.” (phase 1 Balance Sheet and Income Statement)

In the Phase I the decision to include the client Atlantic Wellness, the result shows that the new customer increases the sales significaly but it results in higher accounts receivables and inventory balances. SNC has to decline to incorporate Atlantic Wellness because it affects the account receivables, by declining it helps to improve the AR and the cash flow. This phase presents the opportunity for the leverage supplier discount selling its herbal nutraceutical line to Atlantic Wellness enabled growth. However while growth increased in accounts receivables and inventory balances,...


References: Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed).
Hoboken, NJ: Wiley.
HARVARD BUSINESS. (2014). WORKING CAPITAL SIMULATION:MANAGING
GROWTH. Retrieved from HARVARD BUSINESS, FIN/571 CORPORATE FINANCE
website.
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