FIN 571 Working Capital Simulation
Working Capital Simulation
Aljenette Brown
FIN 571
December 14, 2014
Susanne Elliott
This paper will analyze the Sunflower Nutraceuticals (SNC) and the decisions their company can make to increase working capital and maximize the organization’s growth potential. Moreover, this paper will examine some of the decisions made in each phase of SNC’s simulation, describe how SNC’s decisions affected their working capital, and evaluate the general effects associated with limited access to financing.
Company Background Sunflower Nutraceuticals (SNC) is a privately owned nutraceuticals distributor that provides consumers, distributers, and retailers with dietary supplements such as, herbs for women, vitamins, and minerals. In 2006, SNC expanded their business into several new retail outlets within the nutraceuticals industry. SNC found success introducing their own brand of sports drinks, vitamins for teenage girls, and metabolism-boosting powders that helps to increase women’s metabolism. SNC has the potential to grow into one of the main distributors in the nutraceuticals industry. However, SNC struggled to break even on more than one occasion, as well as exceed the company’s credit line of $3,200,000 to finance payroll and operational needs. Because of their restrictive financing options, SNC must only use a small percentage (approximately 12%) to evaluate, and invest in new business ventures and opportunities in national and international retail markets.
SNC’s Simulation (Years 2013-2015) During the first phase of the simulations, SNC was presented with four opportunities that could help their company maximize their growth potential. The first opportunity was to acquire a new customer. The company is considering adding Atlantic Wellness, a successful health food chain. By taking on this new customer, SNC will increase sales by $4 million per year and EBIT by $260,000. However, the profit margins and net working capital terms would remain the same. The second
Aljenette Brown
FIN 571
December 14, 2014
Susanne Elliott
This paper will analyze the Sunflower Nutraceuticals (SNC) and the decisions their company can make to increase working capital and maximize the organization’s growth potential. Moreover, this paper will examine some of the decisions made in each phase of SNC’s simulation, describe how SNC’s decisions affected their working capital, and evaluate the general effects associated with limited access to financing.
Company Background Sunflower Nutraceuticals (SNC) is a privately owned nutraceuticals distributor that provides consumers, distributers, and retailers with dietary supplements such as, herbs for women, vitamins, and minerals. In 2006, SNC expanded their business into several new retail outlets within the nutraceuticals industry. SNC found success introducing their own brand of sports drinks, vitamins for teenage girls, and metabolism-boosting powders that helps to increase women’s metabolism. SNC has the potential to grow into one of the main distributors in the nutraceuticals industry. However, SNC struggled to break even on more than one occasion, as well as exceed the company’s credit line of $3,200,000 to finance payroll and operational needs. Because of their restrictive financing options, SNC must only use a small percentage (approximately 12%) to evaluate, and invest in new business ventures and opportunities in national and international retail markets.
SNC’s Simulation (Years 2013-2015) During the first phase of the simulations, SNC was presented with four opportunities that could help their company maximize their growth potential. The first opportunity was to acquire a new customer. The company is considering adding Atlantic Wellness, a successful health food chain. By taking on this new customer, SNC will increase sales by $4 million per year and EBIT by $260,000. However, the profit margins and net working capital terms would remain the same. The second
References: Harvard Business Publishing. (2014). Working capital simulation: managing growth. Retrieved from, http://forio.com/simulate/harvard/working-capital/simulation/?#page=dashboard. Parrino, R., Kidwell, D. S, & Bates, T. W. (2012).Fundamentals of corporate finance (2nd ed). Hoboken, NJ: Wiley.