Capital Growth Strategies



Capital Growth Strategies

Introduction

The paper discusses about Brooks, a leading provider for automation, instrumentation and vacuum solutions. It provides these for multiple markets, which include the semiconductor manufacturing, clean energy and life sciences. Brooks' engineering competencies, technologies, and global service capabilities have been able provide its customers the speed to market as well as the surety of high uptime and rapid response.

Brooks has been the leading partner of the global semiconductor manufacturing market since the year 1978, which is a position it has secured through the excellent product development initiatives and superior strategic business acquisitions. Brooks' has expanded its business to fulfil the customers' needs in the life analytical & research markets, sciences industry and clean energy solutions.

There is a comprehensive three step plan to build share holder value. The first step is about including initiatives for the purpose of significantly improving the responsiveness of customer and the overall financial performance. The second step focuses on the leveraging of key investments that Brooks had made in the process of strategic partnerships and product development. The final step initiates the process of broadening Brooks' product portfolio as well as the market reach. Brooks has been successful in making substantive progress in implementing this plan throughout the year with extremely fast progress.

Multiple Evaluation Techniques

Multiple assessment techniques provide valuable information on the performance of the organization not otherwise obtainable through the evaluation of traditional financial performance methods. Traditional methods usually involve the evaluation of an organization by simple financial tools. However, the concept of multiple evaluation techniques utilizes the concept of employing many of these financial techniques to get to a conclusion. Apart from that, multiple evaluation techniques enable the organization in getting a diverse view of the situation, which enables the management to attain and gather information from more perspectives. This reduces the risk of any possible organizational losses.

Sensitivity Analysis

In order to determine the viability of the project, it has to be properly analyzed through sensitivity analysis. The provided data is sorted and merged into a tabular representation for better analysis. The projected profit and loss statement is presented in Table 1.

TABLE 1

Particulars

Sales Turnover:

$ 18,500,000

Cost of Production:

Annual Staff Costs

$ 3,000,000

Inventory Costs

$ 6,000,000

$ 9,000,000

Gross Profit

$ 9,500,000

Operating Costs

$ 1,500,000

Depreciation

$ 1,714,286

$ 3,214,286

Profit Before Tax

$ 6,285,714

Tax Rate (20%)

$ 1,257,143

Net Profit

$ 5,028,571

The 7 years of sales from the new product line would earn Brooks a steady cash flow of $ 6,400,000 (after adding back the depreciation amount, the original profit otherwise would be $ 5,028,571). This can be used in evaluating the project viability by way of investment appraisal.

Similarly, in case the sales were decreased by 10% for each product, the forecasted profit and loss statement would slightly change. The sales revenues would decline, while all the costs are assumed to stay the same, which is presented in Table 2.

TABLE 2

Particulars

Sales Turnover:

$ 16,650,000

Cost of Production:

Annual Staff Costs

$ 3,000,000

Inventory Costs

$ 6,000,000

$ 9,000,000

Gross Profit

$ 7,650,000

Operating Costs

$ 1,500,000

Depreciation

$ 1,714,286

$ 3,214,286

Profit Before Tax

$ 4,435,714

Tax Rate (20%)

$ 887,143

Net Profit

$ 3,548,571

The new yearly cash flow would be $ 4,920,000 ...