Working Capital Simulation
Working Capital Simulation
FIN/571
May 18, 2015
Arnold Harvey
Victoria Holmes
This simulation has given me a better understanding of what managers and CEO’s go through when making decisions for the company. As I went through each simulation more than once to see what affects the decisions had on cash flows, sales and EBIT. In some situations they changed whether it dropped or risen, and others they were completely stagnant with their movement through each phase. Below I will point out how and why I made each decision. Phase 1, I chose to acquire a new customer and tighten up accounts receivable in both times I did the simulation. I chose to take on a new customer because SNC needed the exposure to become known as it is starting to get widespread exposure. The results of this acquisition were that it increased the sales significantly but also left us with higher receivable an inventory balances. (Harvard SNC Synopsis) The results of tightening up the accounts receivable were that sales have declined but the receivables improved which freed up cash. (Harvard SNC Synopsis) In phase 2, I chose to expand the online presence as well as develop a private label in one simulation and the second simulation I just chose to expand on line. In my first choice since I chose to expand online and develop the label, the amounts varied in increase of cash flows. The expansion of the online presence increased Internet sales and the private label increased the EBIT margin only a little. This also counteracts with the accounts receivable and inventory balances after phase one. But it was not that drastic of a change. In ’17 there was no increase or decrease in cash flows, which only means that in that year we broke even on the developing label side. The last phase, I chose to adopt a global expansion strategy in one trial and in the second I chose to adopt and acquire the high-risk customer. The results of acquiring a high-risk customer increase the sale, but had a dramatic
FIN/571
May 18, 2015
Arnold Harvey
Victoria Holmes
This simulation has given me a better understanding of what managers and CEO’s go through when making decisions for the company. As I went through each simulation more than once to see what affects the decisions had on cash flows, sales and EBIT. In some situations they changed whether it dropped or risen, and others they were completely stagnant with their movement through each phase. Below I will point out how and why I made each decision. Phase 1, I chose to acquire a new customer and tighten up accounts receivable in both times I did the simulation. I chose to take on a new customer because SNC needed the exposure to become known as it is starting to get widespread exposure. The results of this acquisition were that it increased the sales significantly but also left us with higher receivable an inventory balances. (Harvard SNC Synopsis) The results of tightening up the accounts receivable were that sales have declined but the receivables improved which freed up cash. (Harvard SNC Synopsis) In phase 2, I chose to expand the online presence as well as develop a private label in one simulation and the second simulation I just chose to expand on line. In my first choice since I chose to expand online and develop the label, the amounts varied in increase of cash flows. The expansion of the online presence increased Internet sales and the private label increased the EBIT margin only a little. This also counteracts with the accounts receivable and inventory balances after phase one. But it was not that drastic of a change. In ’17 there was no increase or decrease in cash flows, which only means that in that year we broke even on the developing label side. The last phase, I chose to adopt a global expansion strategy in one trial and in the second I chose to adopt and acquire the high-risk customer. The results of acquiring a high-risk customer increase the sale, but had a dramatic