Preparation of EFAS and IFAS of a Company

Short Case Study
White Company is a hypothetical manufacturing company located in Dubai. Its main business is
in the optical components’ industry. The Company was established in 2003 with an initial
capital of 5 million AED (represented by 5 million shares). The following information was
extracted from the President’s letter included in the annual report of the Company for the year
ended 31 December 2010.
1. White Company had an exceptional year in 2010.
2. The results of each line of business exceeded the Company’s expectations.
3. Sales at White Company climbed to 135 million AED (about 50 percent over 2009 sales. This
represents the strongest year-to-year sales growth in the Company’s history.
4. Gross margin remained constant as compared to prior year (at a respectable 60% level).
5. Gross margin was maintained despite an increase in direct material cost. The company
managed to improve product mix and price adjustments.
6. The capital markets had rewarded the company for the superior financial performance; the
company’s stock price closed the year at an all time high.
7. The Company has an outstanding team that deserves high praise for performance.
8. The backlog (unfulfilled orders) expanded by 40%.
9. The backlog was principally due to an inability of suppliers to ship application-specific
integrated circuits (“ASIC”) that are critical to the superior performance of the Company’s
products.
10. Although the ASIC designs are owned by the Company, the integrated circuits (ICs) must be
fabricated in highly specialized facilities, of which there are only two world-wide.
11. The extremely capital intensive nature of the facilities prevents the Company from
manufacturing the ICs at its plant.
12. Shortages of electronic component supplies and fabrication time are world-wide
phenomena that have also plagued major competitors.
13. One of the strategic imperatives in the optical components industry is to get your
components incorporated into the designs of your customers products known as “design
wins”, which makes it very expensive for the customer to make a component substitution.
14. Early in the year the Company announced the appointment of Dr. Ahmed Sultan as the
Chief Technology Officer.
15. Dr. Ahmed is known to be one of the pioneers in the optical switching industry and has
numerous patents to his credit.
16. Dr. Ahmed and his team in the research & development (R&D) department continue to
work closely with customers to ensure design wins for the next generation of products.
17. On the competitive landscape, the Company has seen some interesting developments over
the last year.
18. One of the major competitors has focused on building distribution channels in the European
market.
19. The competitor appears to be getting out of North America and the Far-East which are the
Company’s strong holds.
BBUS 400 Capstone – Fall 2011 Page 3
20. However, the Company has seen several start-ups enter the North American and UAE
markets.
21. New start-ups in UAE have been able to attract significant venture capital financing, which
gives them greater ability to build brand recognition beyond what start-ups have normally
enjoyed in the past.
22. On the technology front, recent developments in micro-electronic mechanical technology
have created a promise for dramatic improvements in product performance.
23. Typically the start-ups have been focusing on micro-electronic mechanical technology.
Required:
1. Prepare EFAS for the Company using the information given above
2. Prepare IFAS for the Company using the information given above.