Working capital simulation: managing growth assignment

 Acting as the CEO of a small company (your choice – the Russel 2000 is a good place to look), 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.

3. Write a paper of no more than 1,400 words (not including supporting financial spreads/projections/pro formas, etc…) that analyzes your decisions during each phase (1-3) and how they influenced each of the following final outcomes (metrics) of yor chosen company:

• 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 (your company’s) working capital
• What general effects are associated with limited access to financing