Resources:
Harvard Business Publishing: Working Capital Simulation: Managing Growth Assignment
Ch. 1 – 21 ofFundamentals of Corporate Finance
WileyPLUS Assignments
All additional resources from each week
Review the following scenario:
Acting as the CEO of a small company, you will apply the principles of capital budgeting to invest in growth and cash flow improvement opportunities in three phases over 10 simulated years. Each opportunity has a unique financial profile and you must analyze the effects on working capital. Examples of opportunities include taking on new customers, capitalizing on supplier discounts, and reducing inventory.
You must understand how the income statement, balance sheet, and statement of cash flows are interconnected and be able to analyze forecasted financial information to consider possible effects of each opportunity on the firm’s financial position. The company operates on thin margins with a constrained cash position and limited available credit. You must optimize use of internal and external credit as you balance the desire for growth with the need for maintaining liquidity.
Sign-in to the simulation and review each of the following:
- Welcome Statement
- How to Play
- Terminology Primer
- More Details (this includes information to help you understand how to play the simulation)
Write a paper of no more than 1,400 words that analyzes your decisions during each phase (1-3) and how they influenced each of the following final outcomes (metrics) of SNC:
- Sales
- EBIT
- Net Income
- Free Cash Flow
- Total Firm Value
Address the following in your paper:
A summary of your decisions and why you made them
- How they affected SNC’s working capital
- What general effects are associated with limited access to financing
Include scholarly references (in addition to your course textbook and simulation materials) to support your positions.
Grading Outline (8 points total):
Introduction – .25 points
Summary of your decisions throughout the simulation – .50 points
Effect on SALES (numerical details required) – 1 point
Effect on EBIT (numerical details required) – 1 point
Effect on NET INCOME (numerical details required)- 1 point
Effect on FREE CASH FLOW (numerical details required) – 1 point
Effect on TOTAL FIRM VALUE (numerical details required) – 1 point
Effect on WORKING CAPITAL (numerical details required) – 1 point
Discussion on the general effects associated with limited access to financing – .50 points
Conclusion – .25 points
APA (includes title page, references, spelling, grammar, readability, etc) – .50 points
Required References (make sure to double-space and format into a hanging indent):
Parrino, R., Kidwell, D. S, & Bates, T. W. (2012). Fundamentals of corporate finance (2nd ed). Hoboken, NJ: Wiley.
Harvard Business School. (2012). Working capital simulation: Managing growth [Multimedia]. Retrieved from University of Phoenix, FIN571 – Corporate Finance website.
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