Business Simulation Model

349 words | 2 page(s)

The company has been facing tremendous challenges in improving its financial position. This is because the firm is aggressively expanding and taking on new projects to increase it bottom results. However, during this process, it is dealing with unique challenges. That is causing the various numbers to be more volatile from one period to the next. This is impacting equity and debt. In the case of equity, the firm is seeing a decline in the return on equity from 10.50 to -2.31. At the same time, the debt has been increasing from $7.654 million to $15.729 million. This is having a negative impact on the free cash flow with it declining from $8.256 million to -$1.822 million. These effects are showing how the changes in production levels are requiring more upfront investments. This means that there will be an adverse impact on the balance sheet over the short to medium term. However, in the future, this will help the company to expand the total number of products and merchandise it is providing. (Brigham, 2013)

The same thing is occurring with the opening of the new factory. This required the firm increasing its overall costs in order to realize the long term benefits. As a result, we made the right decision to a build a new factory in area four. The challenge will be to ensure that it helps to contribute to the growth of the firm and its ability to deliver various products to the marketplace quickly. (Fabozzi, 2009)

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The marketing strategy is concentrating on reaching out to different segments of customers. This is achieved by utilizing a selling price which is competitive and offers consumers with something more. In this case, the firm needs to consider the relationship between the price and amount spent to achieve these objectives. This means there must be increase in a proportionate amount relative to sales. If this kind of approach is utilized, it will help the firm to become more effective over the long term. This is when they can improve P&L. (Fabozzi, 2009)

  • Brigham, E. (2013). Financial Management. Hoboken, NJ: Wily.
  • Fabozzi, F. (2009). Finance. Hoboken, NJ: Wiley.

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