Fin/554 Simulation Analysis

Simulation Analysis

Fin/554 Finance for Managerial Decision Making

Professor Charlotte Franck

January 30, 2006

Working Capital Simulation

This simulation on Working Capital Management indicates just how hard it is to maintain cash inflows and outflows. Lawrence Sports was not as operationally sound as it appeared, the company did not run smoothly because of its collection and payment policies. This was the company's main financial challenge, which led to other challenges.

One of the other challenges facing the company in this simulation was how to improve the its bottom line, which generally takes incremental changes. This meant that the individual managers had to negotiate with customers and supplier's better collection and payment schedules in order to optimize the price terms and financing relationships. The decisions made these mangers directly impacted not only Lawrence Sports, but the cash flows of its business partners. These practices could have put Murray in jeopardy of filing bankruptcy had the payments been stretched further out in the future.

Although the information presented her was fictional, it gives credence making sure that there is a positive cash balance position so that the organization can be prepared for most emergencies. It is the unforeseen outflows in the form of payments that could detrimentally impact a company.

Management International Acquisitions Simulation

The challenge of this simulation was how to discount the future cash flows, which is a major tool when evaluating any type of acquisition, especially where gains are concerned. However, the real challenge was accurately interpreting the economic indicators and other financial data, and correlating this information so that it would show the impact on the cash flows of each of the banks in the simulation.

In business acquisitions and mergers the best business practice is