Working Capital Simulation

Working Capital Simulation: Managing Growth

Cash Budgeting Principles and Working Capital Management

• Analyze the influence of member's decisions on sales outcomes or metrics of SNC.

In phase 1, the management’s decision to expand its operations by acquiring a new customer will increase sales. While the company’s decision of tightening accounts receivables and dropping poorly selling products means that SNC’s sales will reduce significantly (Mandal & Goswami, 2010).

In phase 2, the company’s decision to pursue the Big –Box Distribution implies that the SNC’s products will enjoy increased market penetrations and brand visibility, which in turn translates higher sales.

In phase 3, the ability of SNC to successfully renegotiate supplier credit terms implies that sales will not change.

• Analyze the influence of member's decisions on EBIT outcomes or metrics of SNC.

In phase 1, the management’s decision to expand its operations by acquiring a new customer will increase sales, thus an increase in the EBIT. While the company’s step of tightening accounts receivable and dropping poorly selling products means that SNC’s sales will reduce significantly hence a lower EBIT in the long run.

In phase 2, the company’s decision to pursue the Big –Box Distribution implies that the SNC’s products will enjoy increased market penetrations and brand visibility, which in turn translates higher sales implying that the company will have an improved EBIT (Mandal & Goswami, 2010).

In phase 3, the ability of SNC to successfully renegotiate supplier credit terms, implies that the cost of goods sold will reduce, due to high discounts offered by the vendor resulting in increased EBIT.

• Assess the influence of member's decisions on Net Income outcomes or metrics of SNC.

In phase 1, the company’s decision to expand its market by acquiring Atlanta Wellness will have the sales increase, implying the business’s net income will be high. On the contrary SNC’s decision to tighten accounts receivables terms and dropping some line products will decrease the sales, therefore, a lower net income.

In Phase 2, the company’s to pursue the Big Box Distribution will directly lead to high sales implying that the corporation’s net income will increase compared to previous years.

In phase 3, the net income will increase due to reduced cost of cost of goods sold, as the company is paying less for purchase due to prompt payment. Besides, The Company will require lesser amounts of working capital, therefore will pay reduced amounts as interest expense resulting in higher net income.

• Analyze the influence of member's decisions on Free Cash Flow outcomes or metrics of SNC.

in phase 1, the company’s decision to acquire a new risk customer advertently will increase the company’s sales, but due to that fact that the fact that most sales are on credit, most of the company’s cash will be held