Question: would you accept or decline ? give your expectation and assumption minimum 150 words SNC is considering an opportunity to add a large customer, Midwest
SNC is considering an opportunity to add a large customer, Midwest Miracles, a recently launched weight-loss center that is in a precarious financial situation because its entrepreneurial founder took on a significant debt burden. Acquiring Midwest Miracles would allow SNC to increase sales by 30% in 2019. Some analysts have forecasted a 20% probability that Midwest Miracles will declare bankruptcy, and they estimate a recovery rate for suppliers of 50%. Midwest Miracles would be willing to pay significantly higher prices for SNC's products, which can increase the EBIT margin of the whole company by almost 1% However, Midwest Miracles is likely to take a longer-than-average time to pay its invoices. Therefore, SNC's DSO is likely to increase significantly. What would you like to do about this opportunity? Accept Decline 2020 Incrementa 2019 2021 Summary Income Statement (S in thousands) $8,439 $8,439 $8,439 $7,523 $7,523 $7,523 $916 $916 $916 Change in Sales Change in Cost of Sales Change in EBIT Change in Accounts Receivable Change in Inventories Change in Accounts Payable Copy to Clipboard Incremental Balance Sheet($ in thousands) $4,309 $4,309 $4,309 $1,907 $1,907 $1,907 $817 $817 $817 SNC is considering an opportunity to add a large customer, Midwest Miracles, a recently launched weight-loss center that is in a precarious financial situation because its entrepreneurial founder took on a significant debt burden. Acquiring Midwest Miracles would allow SNC to increase sales by 30% in 2019. Some analysts have forecasted a 20% probability that Midwest Miracles will declare bankruptcy, and they estimate a recovery rate for suppliers of 50%. Midwest Miracles would be willing to pay significantly higher prices for SNC's products, which can increase the EBIT margin of the whole company by almost 1% However, Midwest Miracles is likely to take a longer-than-average time to pay its invoices. Therefore, SNC's DSO is likely to increase significantly. What would you like to do about this opportunity? Accept Decline 2020 Incrementa 2019 2021 Summary Income Statement (S in thousands) $8,439 $8,439 $8,439 $7,523 $7,523 $7,523 $916 $916 $916 Change in Sales Change in Cost of Sales Change in EBIT Change in Accounts Receivable Change in Inventories Change in Accounts Payable Copy to Clipboard Incremental Balance Sheet($ in thousands) $4,309 $4,309 $4,309 $1,907 $1,907 $1,907 $817 $817 $817
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