Question

q1: how would you describe sunset boards' cash flows for 2011? write a brief discussiom?

q2: in light of your discussion in the previous question, what do you think Tad's expansion plans?

Answer 1

(1): Sunset Board’s cash flow for 2011 shows that the organization’s core business is financially viable as it is able to generate significant cash flows from its operations. One of the significant items for 2011 was the infusion of additional equity and without this overall level of cash flow for the organization would have been negative. If the additional equity was not infused then the organization would have had to obtain additional debt or would have had to reduce its dividend payout ratio.

(2): My discussion in the previous question highlights the need for significant level of external funding for the company. This is because it needs additional fixed assets and hence the requirement for external funding will not change even if the dividend payout ratio is altered. In light of this I am a bit cautious and worried with Tad’s expansion plans. Expansion has been proposed to be financed with additional funds from outsiders and bank loans. The organization should focus on improving its cash flow before pursuing any expansion. Outstanding debt should also be decreased and taking new debt should be avoided.