Capsim Final Exam Elaboration [100%
Correct Answers]
6 Basic Strategies *Ans* 1. Broad Coast Leader
2. Broad Differentiator
3. Niche Cost Leader (Low Technology)
4. Niche Differentiator (High Technology)
5. Cost Leader w/ Product Lifecycle Focus
6. Differentiator w/ Product Lifecycle Focus
AP Lag (days) *Ans* - AP lag period in days
- 30 days means you on avg wait 30 days b4 you pay your vendors
- the longer you delay, the more likely that vendors will withhold parts deliveries
- is also on production page
average asset turnover *Ans* - measure of the ability of a company to utilize their assets to generate
sales
- asset turnover = sales (revenues)/total assets
average stock price *Ans* - the average (mean) of stock price over each round
- highest overall wins category
- factors: 1. BV (equity/shares outstanding) ; equity = CS + RE 2. EPS (net profit/shares of stock
outstanding) 3. Last 2 Yrs Div Paid (Want div > EPS)
capsim decision spreadsheets *Ans* - sales forecasts in marketing only affect proforma financial
statement which is helpful only if sales forecasts are accurate
- production schedule is actual production and should reflect sales forecast - left over inventory
- first shift capacity is the size of your factor (can double capacity w a 2nd shift but it costs 150% of 1st
shift)
,common mistakes/problems in capsim *Ans* - making big investments in capacity, automation, TQM
but forgetting to raise money through short term or long term debt or issuing new shares of stock
- excessive inventory in the early rounds (don't assume you are going to dominate with overly optimistic
sales forecasts)
cost to double capacity *Ans* increasing capacity is $6 per unit with an adjustments for automtaion
= first shift capacity * ($6 + ($4 * automation level))
cumulative profit *Ans* - the amount of total profit team accumulates over 8 rounds of competition
- everyone starts with ~ 4 million in cumulative profit
- every team should try to hit $25 million cumulative profit at a minimum to ensure you hit one of the
safety nets
december customer survey score (define/formula) *Ans* - customer survey drives demand each
month
= top product in segment's score/sum of all scores
Finance - 3 ways to borrow money *Ans* 1. issue stock
- increases available cash but also dilutes stock price
2. borrow current debt
- will be repaid next year but has a lower interest rate than long term debt
3. issue long term debt
- increases your available cash but your company will have to pay an interest expense for this loan
moving forward
Finance - AR Lag (days) *Ans* - AR lag period in days
- 30 days means that on avg you allow customers 30 days before you expect payment
, - more generous terms produce higher demand
- is also on marketing page
Finance - borrow ($000) *Ans* - bankers will loan current debt up to about 75% of AR (on last year's
balance sheet) and 50% of this year's inventory
- they estimate this year's inventory by examining last year's income statement
- bankers assume worst case a company will have 3-4 months of inventory and will loan up to 50% of
that amount --> is about 15% of combined value of last year's total direct labor and total direct material
which are on income statment
- BC industry is growing, banker increases borrowing limit by 20% to provide room for expansion in
inventory and AR
Finance - cash position *Ans* - if negative then will result in a higher interest emergency loan being
issued to bring your cash account back up to 0
Finance - dividend / share *Ans* - amount of money you plan to give to shareholders this year as an
annual dividend
- entering $1 means you will give each shareholder $1 for each share they hold -> 2 million shares
outstanding, you pay $2
Finance - due this year *Ans* - amount of money you owe your bank on jan 1 of this year
Finance - EPS *Ans* - this years projected EPS, defined as proforma profits/common shares
outstanding
Finance - interest rate *Ans* - paid on current debt you borrow this year
Finance - issue long term debt *Ans* - amount of long term debt (bonds) you wish to issue this year
(amount you wish to borrow)
- transaction takes place jan 1
- bonds are issued at the long term interest rate and you cannot enter more than the max issue this year
Correct Answers]
6 Basic Strategies *Ans* 1. Broad Coast Leader
2. Broad Differentiator
3. Niche Cost Leader (Low Technology)
4. Niche Differentiator (High Technology)
5. Cost Leader w/ Product Lifecycle Focus
6. Differentiator w/ Product Lifecycle Focus
AP Lag (days) *Ans* - AP lag period in days
- 30 days means you on avg wait 30 days b4 you pay your vendors
- the longer you delay, the more likely that vendors will withhold parts deliveries
- is also on production page
average asset turnover *Ans* - measure of the ability of a company to utilize their assets to generate
sales
- asset turnover = sales (revenues)/total assets
average stock price *Ans* - the average (mean) of stock price over each round
- highest overall wins category
- factors: 1. BV (equity/shares outstanding) ; equity = CS + RE 2. EPS (net profit/shares of stock
outstanding) 3. Last 2 Yrs Div Paid (Want div > EPS)
capsim decision spreadsheets *Ans* - sales forecasts in marketing only affect proforma financial
statement which is helpful only if sales forecasts are accurate
- production schedule is actual production and should reflect sales forecast - left over inventory
- first shift capacity is the size of your factor (can double capacity w a 2nd shift but it costs 150% of 1st
shift)
,common mistakes/problems in capsim *Ans* - making big investments in capacity, automation, TQM
but forgetting to raise money through short term or long term debt or issuing new shares of stock
- excessive inventory in the early rounds (don't assume you are going to dominate with overly optimistic
sales forecasts)
cost to double capacity *Ans* increasing capacity is $6 per unit with an adjustments for automtaion
= first shift capacity * ($6 + ($4 * automation level))
cumulative profit *Ans* - the amount of total profit team accumulates over 8 rounds of competition
- everyone starts with ~ 4 million in cumulative profit
- every team should try to hit $25 million cumulative profit at a minimum to ensure you hit one of the
safety nets
december customer survey score (define/formula) *Ans* - customer survey drives demand each
month
= top product in segment's score/sum of all scores
Finance - 3 ways to borrow money *Ans* 1. issue stock
- increases available cash but also dilutes stock price
2. borrow current debt
- will be repaid next year but has a lower interest rate than long term debt
3. issue long term debt
- increases your available cash but your company will have to pay an interest expense for this loan
moving forward
Finance - AR Lag (days) *Ans* - AR lag period in days
- 30 days means that on avg you allow customers 30 days before you expect payment
, - more generous terms produce higher demand
- is also on marketing page
Finance - borrow ($000) *Ans* - bankers will loan current debt up to about 75% of AR (on last year's
balance sheet) and 50% of this year's inventory
- they estimate this year's inventory by examining last year's income statement
- bankers assume worst case a company will have 3-4 months of inventory and will loan up to 50% of
that amount --> is about 15% of combined value of last year's total direct labor and total direct material
which are on income statment
- BC industry is growing, banker increases borrowing limit by 20% to provide room for expansion in
inventory and AR
Finance - cash position *Ans* - if negative then will result in a higher interest emergency loan being
issued to bring your cash account back up to 0
Finance - dividend / share *Ans* - amount of money you plan to give to shareholders this year as an
annual dividend
- entering $1 means you will give each shareholder $1 for each share they hold -> 2 million shares
outstanding, you pay $2
Finance - due this year *Ans* - amount of money you owe your bank on jan 1 of this year
Finance - EPS *Ans* - this years projected EPS, defined as proforma profits/common shares
outstanding
Finance - interest rate *Ans* - paid on current debt you borrow this year
Finance - issue long term debt *Ans* - amount of long term debt (bonds) you wish to issue this year
(amount you wish to borrow)
- transaction takes place jan 1
- bonds are issued at the long term interest rate and you cannot enter more than the max issue this year
