The financial development of organizations is very important for their steady progress. In this respect, it is possible to refer to the experience of Sunset Boards Inc. In fact, the financial position of the Sunset Boards Inc. is stable but the company can enhance its position, if the company can complete its expansion strategy. At this point, the cash flow is an effective tool with the help of which the company and investors can forecast the financial development of the company and its business development.
In this respect, it is possible to dwell upon the Sunset Boards Inc. cash flow for 2009. The analysis of the operating cash flow, the cash flow from assets, the cash flow to creditors and the cash flow to investors reveal the fact that the company holds a stable position in the market but, under the impact of its expansion plan, the company may face certain reduction in its expected revenues, although the cash flow will grow steadily. At this point, it is worth mentioning the fact that operating cash flow is likely to grow but the company will have to pay the growing debt and the cash flow to creditors and investors will increase proportionally to the growth of revenues of the organization. Therefore, the company will increase its spending to direct cash flow to its creditors and investors. On the other hand, the company can improve its performance consistently in a long-run perspective.
In such a way, Tad’s expansion plan is quite controversial. On the one hand, the implementation of the plan can enhance the position of the company in the market and open the new market, where the company can start progressing, taking into consideration the popularity of surfing in Haiti. At the same time, the company and its investors should be aware of existing risks and threats to the business development and market expansion. First, the company has relatively small experience of operations in the industry. Second, the competition in the new market is high and Sunset Boards Inc. should come prepared to confront the strong competition. Therefore, the company should offer some original, unique products or offer customers attractive prices. In actuality, the company can gain a strategic advantage only due to the pricing policies but the change of pricing policy means the reduction of price of the company’s products in the new market. In such a way, the company will have to sacrifice its revenues for the sake of taking its share in the new market. This decision may raise the dissatisfaction of stockholders because this will lead to the reduction of the revenues of the company.
On the other hand, it is important to understand that the possible drop in revenues is quite natural and the company can take a risk to enter the new market successful. However, the company needs the support of professional financiers because Tad alone cannot cope with successful completing of his expansion plan. In this regard, investors should assess actual risks and expected return on investments to understand the extent to which the investment in Tad’s expansion plan is risky and what benefits it can bring to the company and its investors. In such a way, investors should weigh carefully existing financial resources and potential of the company to take a decision on the investment.
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