Space-Age Materials, Inc. Financial Analysis and Forecasting Directed Most people think of pottery and figurines when they think of ceramics. However, ceramic mate- rial is particularly well suited for use under high temperatures and intense pressure, especially if light weight is desirable. Because of these properties, ceramics are ideal for use in high-performance engines used in turbocharged automobiles, jet aircraft, and heavy trucks. Unfortunately, though ceramics are also very brittle, and this characteristic has long prevented their widespread use in such engines. In 1986, however, Daniel Alexander, a materials engineer, and Roger Avalon, a chemical engineer, succeeded in combining silicon carbide fibers with ceramic materials in a manner that pre- served the desirable properties of ceramics but eliminated most of the brittleness. They then formed Space-Age Materials, Inc, and used their own limited capital to build 50 prototype turbine blades with the new ceramic material. On the basis of extensive testing by a number of large aerospace companies, the new firm began receiving production-quantity orders for the new blades. The new business was an immediate success. Production began in the summer of 1987. Oper- ating losses were incurred during the first short year, but the company has earned a profit in each sub- sequent year. During 1991 and 1992 the number of new orders exceeded Alexander and Avalon's projections, By the end of 1992, it was obvious to all-including Alexander and Avalon- -that addi- tional expansion would be required if the firm was to attain its full growth potential or even to keep competitors from eroding its position. Ironically, Alexander and Avalon's technological successes were making their financial fore- casts incorrect. Consequently, they hired Sue Li, an MBA, as the company's financial manager to develop a detailed financial plan. Li knew that the company had been lucky and that some large chemical companies, including Monsanto and DuPont, were thinking about entering the market. Space-Age, however, had not been sitting idle. In 1991, the company's research-and-development people produced some exciting breakthroughs, while at the same time there was an increasing trend toward using ceramics in jet engines. As a result, it became probably needed good financial plan accurately forecasting the future needs of the company is critical to the future success, and probably to the continued existence, of the company. apparent that additional funds were if the company were to maintain, let alone increase, its market share. Therefore, a Li organized Space-Age's financial planning process into five steps: (1) A study is made of basic trends in the materials industry and also in the acrospace and other markets where Space-Age expects to operate. How will our customers' needs change over the next five years, and what can we do to meet any existing or developing needs? Space-Age Materials, Inc. Financial Analysis and Forecasting Directed Most people think of pottery and figurines when they think of ceramics. However, ceramic mate- rial is particularly well suited for use under high temperatures and intense pressure, especially if light weight is desirable. Because of these properties, ceramics are ideal for use in high-performance engines used in turbocharged automobiles, jet aircraft, and heavy trucks. Unfortunately, though ceramics are also very brittle, and this characteristic has long prevented their widespread use in such engines. In 1986, however, Daniel Alexander, a materials engineer, and Roger Avalon, a chemical engineer, succeeded in combining silicon carbide fibers with ceramic materials in a manner that pre- served the desirable properties of ceramics but eliminated most of the brittleness. They then formed Space-Age Materials, Inc, and used their own limited capital to build 50 prototype turbine blades with the new ceramic material. On the basis of extensive testing by a number of large aerospace companies, the new firm began receiving production-quantity orders for the new blades. The new business was an immediate success. Production began in the summer of 1987. Oper- ating losses were incurred during the first short year, but the company has earned a profit in each sub- sequent year. During 1991 and 1992 the number of new orders exceeded Alexander and Avalon's projections, By the end of 1992, it was obvious to all-including Alexander and Avalon- -that addi- tional expansion would be required if the firm was to attain its full growth potential or even to keep competitors from eroding its position. Ironically, Alexander and Avalon's technological successes were making their financial fore- casts incorrect. Consequently, they hired Sue Li, an MBA, as the company's financial manager to develop a detailed financial plan. Li knew that the company had been lucky and that some large chemical companies, including Monsanto and DuPont, were thinking about entering the market. Space-Age, however, had not been sitting idle. In 1991, the company's research-and-development people produced some exciting breakthroughs, while at the same time there was an increasing trend toward using ceramics in jet engines. As a result, it became probably needed good financial plan accurately forecasting the future needs of the company is critical to the future success, and probably to the continued existence, of the company. apparent that additional funds were if the company were to maintain, let alone increase, its market share. Therefore, a Li organized Space-Age's financial planning process into five steps: (1) A study is made of basic trends in the materials industry and also in the acrospace and other markets where Space-Age expects to operate. How will our customers' needs change over the next five years, and what can we do to meet any existing or developing needs