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Exam (elaborations)

Capsim Final Exam Elaboration [100% Correct Answers]

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  • Course
  • CAPSIM
  • Institution
  • CAPSIM

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 Life...

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  • September 23, 2024
  • 22
  • 2024/2025
  • Exam (elaborations)
  • Questions & answers
  • CAPSIM
  • CAPSIM
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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

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