FinGame Results

Game Strategy

To test the market by

following suggested
financial decisions made
in Quarter 1.
Knowing that poor
earnings had a
devastating effect on the
stock price and dividends,
we initially planed to keep
the gross profit margin
high while paying the
lowest amount possible
for our merchandise

Profitability

Financial Reasoning

By Quarter 3 we noticed
that productivity was not
being maximized due to a
lack of plant space. We then
decided to compensate for
the deficit through a
purchase increase, yet
failed to realize that one
unit of plant capacity
equals one unit of product,
and therefore
underestimated the amount
of plant space needed to
meet future productions.
It was also recognized in
this quarter that the excess
in machinery was causing
us to lose money.

In regards to this
quarter, we should
have purchased more
plant space when the
game began so that
our financial
inefficiency would not
have occurred, and
allowed us to possibly
be more profitable
earlier on.

Counteracting Long Term

Debt Through Short Time
Financing

Though we felt incurring the initial debt

of the factory would eventually net a
substantial income we still wanted to
decrease the amount of debt that we
currently possessed. Therefore, we
attempted to pay off our short term
debts, which would negate the amount of
debt we possessed leaving the bond
taken on to finance the acquisition of the
plant.

Debt Ratio
Ratio used to determine how risky a company is and
how much it owes to its investors
The proportion of liabilities that a company has relative
to its assets
In the beginning of the game we were more
conservative due to lack of knowledge of the
environment but towards the end of the game we took
on more debt through bond loans, high interest rates
and short-term investments
Our overall debt ratio for the game as a whole was .
363;
Showing that we were relatively conservative in our
financial decisions

Debt Ratio Cont.

Initially our goal was just to have a debt ratio

less than one
However, as we became more familiar with
the game, we wanted to maintain the debt
ratio that paired with the highest stock price,
which was .20
Strengths: Investors consider our company
safe to invest in, we were not required to pay
high interest rates, and we did not run the
risk of running out of money when needed
Weakness: Missing out on potential profitable
investments and sitting on large amounts of
cash instead of using it to profit the business

Debt Ratio (Actual)

Debt Ratio (ProForma)

Fundamentals of the
business

Every company has a common goal of producing a

great product which increases revenue while
keeping the cost of labor low and increasing their
equity
While stockholders common goal is to have a
higher rate of return in the company of their
choice
Smart investors look for the subtle changes in a
non-cyclic company. If revenues and profits are on
a steep upward trend, with no indication of
leveling off, then they will invest and the stock will
increase

Sector Changes and Market

Swings

Sector changes are simply sudden changes in the market,

which can have an negative of positive impact on the stock
priceours being the Wehrley Shift
Market swings are the natural flow of the market; it could go
up or down at any time, which can push stocks up or down;
which accounts for the variation in accumulated wealth
The fluctuations in our stock price was a direct correlation of
our net income and investments in the company

Return on Equity

Defined as: how efficient a company is in

reinvesting earnings to generate additional
earnings
Investors look for a high and growing ROE
percentage rate of companies to invest in
The shareholders of our company did not receive
a good return on their capital that was invested in
the business due to the sharp increase of interest
expense, decrease in gross profit margin and
therefore decrease in net income during Quarter
4.
The ROE was also decreased because of the bond
we used to finance the large amount of plant
purchased, significantly reduced our net income

Return on Equity (ROE)

Actual

Return on Equity (ROE)

ProForma

Mistakes and Tips for

Future Generations

Failing to purchase a plant

when needed left us with
excess machinery, a
steadily raising demand
and an absence of
inventory for the last two
quarters
This small mishap cost us
a lot of money, trust with
our shareholders and halt
in productivity
For a percentage of the
time our ROE varied
slightly from the bank
because we were not
using our assets properly

Take advantage of the

wehrleys shift to buy
back shares
Pace your production in
relation to plant capacity
and machinery
Finance long-term projects
with long-term debt; (debt
should not be paid off until
looking at your ROA and
ROE)
Never sit on idle cash,
always reinvest it in the
company for growth
and/or distribute to
shareholders

Conclusion

As a result of not purchasing more

plant space upon the commencement of
the game we failed to maximize
productivity, which ultimately caused a
loss in possible profit. Once recognized
profits began to increase and the new
focus became the management and
financing of debt incurred as a result of
asset acquisitions and debt control.