Welcome to the Working Capital Simulation

SUNFLOWER NUTRACEUTICALS

Sunflower Nutraceuticals $($SNC$)$ is a privately held nutraceuticals distributor

based in Miami, Florida. SNC started as an internet$-$based, direct$-$to$-$consumer

distributor and retailer of dietary supplements, including vitamins, minerals, and

herbs for women, with product offerings for all age groups. Through its website

and catalog, SNC offers customers a large selection of stock keeping units

$($SKUs$)$ from more than $50$ third$-$party brands. Since its founding, the company ambitiously expanded into new retail outlets and

launched several private$-$label brands, including a line of wormen's electrolyte sports drinks, metabolism$-$boosting powders, and a

vitamin line for teenage girls.

SNC is breaking even, with relatively flat annual sales growth on total revenues of $$10$ milion. The business is working$-$capital$-$

intensive, and margins are generally thin. Several times during the past few years, the company struggled to finance the payroll, given

the firm's constrained cash position, and more than once the company's line of credit was overdrawn. SNC keeps a minimum amount

of cash on hand to meet operational needs and this level of required cash is $$300,000.$ The company also accesses a line of credit,

with a fairly restrictive set of governing covenants, issued by a national bank. The credit limit on the facility of $$3,200,000$ is priced asa

spread over the $1-$year LIBOR. It is currently set at a rate of $8\%.$ SNC uses a cost of capital of $12\%$ to evaluate investment

opportunities.

Health food oompanies have sold vitamins for decades, but the nutraceuticals industry is relatively new. Although regulatory bodies

apply stricter definitions, the term nutraceuticals generally means "a fortified food or dietary supplement that provides health benefits".

Examples include omega$-3$ fatty acids, probiotics, and soy and energy drinks. The key driving factors for industry growth are the

increase in the elderly population, the rate of growth in chronic diseases, the relative affluence of the working population, and

increasing societal awareness of preventive medicine.