Essay on Question No

Submitted By Chenhuiting21C
Words: 609
Pages: 3

Question No. 1: What are the risks associated with Deluxe’s business and strategy? What financing requirements do you foresee for the firm in the coming years?
Answer:
The company Deluxe Corporation was engaged in the business of making printer paper checks in the region of the United States of America. Recently, the company had discharged all of its long term debts and had not even issued a major bond in nearly 10 years. Even though, the company’s products was in development and mature life cycle stage, but the CEO of the Deluxe Corporation, Lawrence J. Mosner anticipated deterioration in the demand of the product. With the advancement in the technologies, for example, e-transfers, ATMs, Debit and Credit Cards, the old products will be outdated. As a result of that, there will be very low scope or area for the new products in the existing line of business. As expected by the CEO, the printing papers, business has almost reached to its maximum point and from now on demand will only decline.
After considering the point of view of the CEO of the business, one could predict that the collapse in the business of the printing paper check would help the other businesses, i.e. the electronic business will be responsible for the downfall of the printing papers check. In this regards, the increase in the spun off of eFunds increases the risk in the sense that the company would lose growth opportunity. On the other hand, the Deluxe Company has lost divergence by spinning-off two companies. These companies who were in the business of electronic payments could have provided better opportunities and a diversified business than the printing checks.
Only a few participants govern the business in the whole market because that the printing business normally works on big scales of economies, because of this the potential disagreement in prices would be a risk in the future. Financial forecast given in the case study shows an increasing trend in the cash flows of $212 million in 2002 to $229.7 million in 2006. Cash position was also increased to $625 million till 2006, on the other hand, the debt level of the company stays static at $161.5 million. Sales were forecasted at the rate of around 26.7%. As a result of that, the interest coverage ratio remains strong. Although, the forecasted values should not bother the company, but above mentioned business risk and an increase in the pressure from the members of the company raises…