Symptoms of End Gaming

Huge swings in Balance Sheet Large Dividends Large Stock repurchases Huge Change in debt Large

sale of capacity Products are killed Advertising, sales , R&D budgets are slashed No plant investment

End gaming..Why undesirable

End Gaming indicates bad management A healthy company does not need to End Game End game will occur if the team has unproductive assets Eliminate unproductive assets early and end gaming becomes a non-issue So what makes for a healthy company?

End Gaming-when irrelevant?

Balance Sheet
Leverage between 1.5 and 2.5 Leverage = Total Assets / Total Equity

Sales/Current Assets between 3 and 5

Income Statement
Contribution margin above 30% ROS above 5%

End Gaming-when irrelevant?

Product characteristics:
Customer satisfaction indexes above 40 Plant utilization between 150% and 180%

Inventories between 1 and 90 days of sales

Awareness greater than 80% Accessibility greater than 80%

When should you engage in End Gaming?

Best answer is Round-1 Plant utilization of 150% has no plant to liquidate Products with score above 40+ are never killed In a competitive environment companies cannot survive while slashing SGA budgets

Genuine End Game Issues

Three issues make end game different from early rounds

Companies become cash cows in round 6, 7 and

8 Investment needs fall relative to earlier rounds Fixed cost fall as percentage of sales

Spinning out cash

Invest in growth Reduce leverage Declare dividends Buy back stock