In round 1 and round 3, we did quite a lot investment in our department, we tended to issue shares and long term debt at the maximum level. In these two rounds, the PIE ratio is much higher other rounds, which are nearly 600 and about 900. Although we released two new products which requires significant costs as well as the expenses on automation and purchasing capacity, the results is still really pleasant, in the rounds after, e achieved the most profit compared to other groups in the industry.
In addition, the stock price boosts by approximately $10 and reflects a continuous rising trend. However, due to the previous outstanding performance, we are kind of carried away by the success. In round 5, we are overconfident and too ambitious about our sales figure, so we optimistically overestimate the sales forecast. We produce too many units but the actual sales are not as well as we expected. Excessive inventory is left over and leads o high inventory carrying cost. Additionally, we spent too much in plant improvement, variable cost and SAGA stuff.
But with huge expenses incurred, we didn’t generate sufficient funds in finance segment. In general, with the inaccurate forecast, we spent too extravagant but didn’t raise enough funds to support. As a result, we didn’t have cash and unavoidably got a significant emergency loan. We learnt the lesson and act more prudently in following round. In order not to impose further financial burden, we issued certain mount of shares and didn’t change position in automation and capacity to save cost.
Fortunately, we turnaround from a tough situation and has a boost in free cash. Since it is close to the final round, we will retire the debts to create increase in retained earnings. To sum up, we neglect the importance of financing in previous rounds, which seems didn’t rationally utilize available funds to maximize profit. But we realized the problem and made timely adjustment and finally recovered from difficulties. And believe the prospect is bright.