HISCO Summary Annual Report

Page 1 of 3

Annual Operating Review

What key concept or technique from the week’s readings and/or discussion were

you able to utilize in the quarter’s decisions?

Throughout our prior conversation, I gained a profound understanding of the Annual Operating Report

(AOR). As we aim to elevate our company's overall performance, we must conclude the year

positively. Initially, I needed to recognize the importance of investing in our company's strengths,

which resulted in our competitor, Matek, exceeding us due to our lack of quality. Therefore, we must

prioritize our strengths instead of focusing on areas that require improvement. Although it may seem

tempting to seek external assistance in areas needing more expertise, we must remain committed to

our core competencies to succeed.

Using the Pre-Tax Net Income (Plan vs Actual) Walk Chart, explain all variances

and explain the key drivers. Provide data to support your explanations.

Hisco, a leading company in its industry, has again experienced a considerable increase in pre-tax net

income. This success can be attributed to the company's impressive growth and sales, clearly

demonstrated in the chart indicating that Hisco is executing its plan efficiently. In addition, the

company's growth and market share are almost equal, indicating a balanced and sustainable strategy.

To ensure that Hisco stays on track, the company has increased its advertising and marketing funding

compared to previous quarters. Despite these efforts, the final quarter saw such high sales that Hisco

could not break even. However, the base costs reveal a significant increase in sales, with a record-

high of $160k for Hisco. This is an impressive milestone for the company, indicating it is on the path

to even more significant achievements. As the company expands globally, its growth is expected to

continue, and Hisco can look forward to a bright future.

Using the Cash Flow Walk Chart, explain all sources/uses of cash and explain the

key drivers. Provide data to support your explanations.

The financial performance of Hisco this quarter has been notably impressive, showcasing a consistent

trend of positive cash flow over the past year. Despite the revenue generated from sales being wiped

out by receivables, this is a common challenge when dealing with hospitals that tend to delay

Page 2 of 3

payments. However, negotiating for quicker payment agreements can resolve this issue. In addition,

since taking over, Hisco's cash flow has seen substantial enhancements, despite currently sitting at -

$160K, the highest negative figure in the company's history. Nonetheless, we remain optimistic that

cash flow will continue to improve and eventually become positive. As a result, by Q3 next year, we

anticipate a much better cash flow position for Hisco.

What revisions would you make to your original SWOT analysis going forward

over the next 2 to 3 years? Be specific within each of the four categories.

Our engineering expertise at Hisco is highly esteemed and our most valuable asset in the market. To

maintain our edge over competitors, we recognize the importance of securing funding, despite

limitations. Throughout the first quarter, we diligently worked towards reducing our reliance on credit

and are proud to say we have become self-sufficient. As we focus on expanding our global outreach

and providing top-notch services to hospitals worldwide, we acknowledge the challenges we continue

to face, including stiff competition from new players in the East as we grow.

In what ways were you surprised by the final team rankings in the value creation

winning? Within each metric on the ‘Winning’ slide, what did or did not reflect

your expectations?

I was surprised by the turn of events when Matek emerged as the victor in the competition, leaving

Hisco in the dust. Hisco had been performing admirably in the initial three quarters, but Matek gained

the upper hand in the fourth quarter. Upon scrutinizing the financial statements, I observed that Matek

had a higher net income despite having less cash flow. This indicated that Matek had invested in their

enterprise to gain an advantage over their rivals. I realized that net income carried more significance

in the competition, and thus, I shifted my focus towards increasing our own company's net income as

well.

Over the next 2 to 3 years, in what potential new market/product/service

opportunities could Hisco invest for growth? Discuss at least 2 specific

opportunities

Page 3 of 3

Hisco must expand its global presence and increase its market share within the next two years. Our

achievements in the eastern market have set the foundation for growth. We plan to invest in eastern

locations with additional financial resources to secure more substantial expansion. Our latest research

project, number three, is a true game-changer. It introduces innovative hospital housekeeping,

maintenance, and dietary control features, significantly enhancing our readers' functionality. This

project alone can potentially increase our market share by a staggering 50%, surpassing Redex's Q3

breakthrough and positioning us to compete at a higher level.

If you could make one single change over the past year, what would it be? How

might that change impact the outcome?

Investing in Research and Development is crucial for the growth and success of a company. During

the first and second quarters, my main focus was on generating more cash flow and net income for the

organization, which resulted in limited investments during those periods. However, I may have

underestimated the impact of R & D on the company's overall progress. Had I invested in all projects

alongside engineering earlier, Hisco could have released new and better-quality products, gaining an

edge over competitors. While it is impossible to go back in time, it is still possible for Hisco to increase

its investment in R&D in the coming years, which can lead to the realization of new ideas and their

successful implementation. Proper investments in R&D can pave the way for the future success and

growth of the company.