PAPER CORPORATE FINANCE

Would IT BE MORE HELPFUL IF YOU JUST GO ON THE SCHOOL SITE REVIEW THE ENTIRE RESULTS

· Sunflower Nutraceuticals (SNC) is a privately held nutraceuticals distributor based in Miami, Florida, and founded in 2006. SNC started as an internet-based, direct-to-consumer distributor and retailer of dietary supplements, including vitamins, minerals, and herbs for women, with product offerings for all age groups. Through its website and catalog, SNC offers customers a large selection of stock keeping units (SKUs) from more than 50 third-party brands. Since its founding, the company ambitiously expanded into new retail outlets and launched several private-label brands, including a line of women's electrolyte sports drinks, metabolism-boosting powders, and a vitamin line for teenage girls.

· SNC is breaking even, with relatively flat annual sales growth on total revenues of $10 million. The business is working-capital-intensive, and margins are generally thin. Several times during the past few years, the company struggled to finance the payroll, given the firm's constrained cash position, and more than once the company's line of credit was overdrawn. SNC keeps a minimum amount of cash on hand to meet operational needs and this level of required cash is $300,000. The company also accesses a line of credit, with a fairly restrictive set of governing covenants, issued by a national bank. The credit limit on the facility of $3,200,000 is priced as a spread over the 1-year LIBOR. It is currently set at a rate of 8%. SNC uses a cost of capital of 12% to evaluate investment opportunities.

· Health food companies have sold vitamins for decades, but the nutraceuticals industry is relatively new. Although regulatory bodies apply stricter definitions, the term nutraceuticals generally means "a fortified food or dietary supplement that provides health benefits". Examples include omega-3 fatty acids, probiotics, and soy and energy drinks. By 2010, the global nutraceuticals market was worth approximately $128.6 billion; it is forecasted to grow at a compound annual growth rate (CAGR) of 4.9% and reach $180.1 billion by 2017. The key driving factors for industry growth are the increase in the elderly population, the rate of growth in chronic diseases, the relative affluence of the working population, and increasing societal awareness of preventive medicin

Phase 3: 2019 - 2021 Synopsis

You selected Renegotiate Supplier Credit Terms, and Adopt a Global Expansion Strategy and declined Acquire a High-Risk Customer . Below is a synopsis of how each opportunity affected your Working Capital and Cash Flow.

Renegotiate Supplier Credit Terms

SNC's ability to renegotiate payment terms with Dynasty Enterprises resulted in a significantly lower accounts payable balance and improved margin. Taking on Viva Familia as a new customer helped SNC grow its top line with a very modest increase in cash tied up in inventory.

Phase 2: 2016 - 2018 Synopsis

You selected Pursue Big-Box Distribution, Expand Online Presence, and Develop a Private-Label Product and declined no opportunities . Below is a synopsis of how each opportunity affected your Working Capital and Cash Flow.

Pursue Big-Box Distribution

Taking on Mega- Mart Inc. as a customer resulted in impressive top-line growth but the company's EBIT margin declined.

Expand Online Presence

Expanding SNC's presence in online retail increased sales with little negative impact on working capital balances.

Develop a Private-Label Product

Selling the private label product to Fountain of Youth Spas increased SNC's EBIT margin, only modestly resulting in increased accounts receivable and inventory balances.

Phase 1: 2013 - 2015 Synopsis

You selected Acquire a New Customer, Leverage Supplier Discount, and Tighten Accounts Receivable and declined Drop Poorly Selling Products  Below is a synopsis of how each opportunity affected your Working Capital and Cash Flow.

Acquire a New Customer

Taking on Atlantic Wellness as a new customer increased sales significantly but resulted in higher accounts receivable and inventory balances.

Leverage Supplier Discount

Selling its herbal nutraceutical line to Nutrilife enabled meaningful top-line growth. While this growth increased both the accounts receivable and inventory balances, the drain on cash flow was partially offset by increased EBIT due to the favorable contract negotiated with Ayurveda Naturals.

Tighten Accounts Receivable

Although sales declined as a result of SNC's decision to drop Super Sports Centers, the company's accounts receivable picture improved dramatically, freeing up cash.