The principles of capital budgeting to invest in growth and cash flow improvement opportunities.

In the Harvard Business Publishing: Working Capital Simulation, I was tasked with taking on the role of a CEO for a small company and applying principles of capital budgeting to invest in growth and cash flow improvement opportunities over a 10 year simulated period. This challenged me to analyze effects of these different opportunities on working capital, income statements, balance sheets, statement of cash flows and optimize use of internal/external credit by balancing need for liquidity and desire for growth. Throughout this process there were several decisions made which had an effect on all four mentioned metrics (sales, EBIT, net income and free cash flow).

To begin with, one decision I made was to add five new customers during the first phase while assessing their risk levels prior. This allowed SNC’s sales to increase $6 million annually since it allowed us to expand our customer base and explore other markets we have not tapped into yet (Kim & Mauborgne 2015). Additionally in Phase 1 I decided to extend our payables terms from suppliers allowing us reduce inventory costs but also lowering our debt burden by trading off short-term financing with more efficient supplier offerings. As a result this reduced cost significantly while retaining efficiency in areas they would typically spend money – saving them even more (Fundamentals 21 2019).

The second phase saw me adjusting SNC’s accounts receivable collection cycle from 35 days down 20 days – improving liquidity due faster turnover from customers settling bills quicker thus generating greater revenue back into operations without changing sales figures dramatically (Tahir 2018). Furthermore during the same phase due diligence conducted resulted revising policies involving processing orders which took place before manufacturing commenced; as well as reworking how lead times are projected decreasing uncertainty slightly about demands that often arise at end user customer level helping smooth out any discrepancies between number products being ordered against what is actually produced or delivered ultimately increasing production output little bit further leading margin expansion too reinforcing bottom line performance whereas free cash flow negatively impacted by administrative changes previous progression period started improve again under my watch those specific proceedings tools employed website provided convenient platform having all exercises tracked easily accessible whoever replacing position understand quickly where operation stands current time avoid heavy bar learning curve future assessment scenarios strategically placed create fertile conditions cultivate more favorable outcome then eventually reach hoped final tall order handful years try achieve results desired clear understanding fundamental finance allowing effective management resources maintaining forecasted financial information excellent method applied consistently develop methods measure progress every step way ascertain whether objectives strategic goals set forth achieved soon possible manner enable company pursue mission successfully hopefully success realized past phases modeling basis proper thought initiative action taken deals available enhance offer selling point each potential clienteles acceptable prevailing market trends sure gauges lowest price points matching received opportunity exceeds expectations better than rivals ensure continuing patronage loyal customer base plus ensuring long lasting relationship built trust mutual respect values held cornerstone firm’s core beliefs focus objectivity detached subjectivity evaluations help properly evaluate path forward strive excellence budding success attainable higher ambition perpetual seeking .

References
Fundamentals 21. (2019) Fundamentals Of Corporate Finance 12th Edition Ch 21 Retrieved From https://www.wileyplus.com/go/fundamentalsofcorporatefinance12eorganizationid1711652?uicode=UFLA&assetId=219222 Kim W., & Mauborgne R.(2015) HBR’s Must Read On Strategy Retrieved From http://searchcio-midmarket insightlinks com/?pagetype=articlecontent&docid=973179 Tahir M.(2018 ). Accounts Receivable Collection Cycle Definition Retrieved From https://www.investopedia.com/terms/a/accountsreceivablecollectioncycleperiod..asp