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Non-Tech : LIFEWAY FOODS (LWAY) -- Ignore unavailable to you. Want to Upgrade?

To: mark cox who wrote (136)	11/21/1997 3:04:00 PM
From: mark cox	Read Replies (1) \| Respond to of 352

I am going on a vacation to Las Vegas and S.F. so I won't be posting to the thread for a while unless I can get internet access from the hotels. I have never tried to estimate a company's affordable growth rate before so I don't know if I'm doing it correctly. I am using Revenues, Cost of Goods Sold, Operating Expenses, Accounts Receivable, Accounts Payable and Cash Flows. I added only 10% to the figure of Operating Expenses because those should be relatively fixed being mostly overhead, (insurance, taxes, salaries will remain the same and utilities will probably increase some). LWAY's Accounts Receivables take 7 weeks to turn into cash and their Accounts Payable are delayed 5 weeks so there is a 2 week delay between getting paid and paying their bills which they would have to make up from their cash flows. I used a growth rate of 50%,(Revenues not Earnings). Using current Revenue figures of $1.5 million/quarter would boost Revenues to $2.25 million/quarter. This figure would be an increase of $62,500 in Revenues per week. Cost of Goods Sold would increase $34,750 per week and Operating Expenses,(+10%) would increase by $3,500 per week for a total increase of $38,000 dollars in cost per week verses a gain of $62,500 in revenues per week. As I said before there is a delay of 2 weeks in receiving and paying bills so LWAY would have to come up with 2 weeks worth of bills in cash which would be $76,000. LWAY presently has $725,000 in cash. Of course the increase of $62,500 in revenues per week will have a very positive impact on cash flows after the 2nd week. For the past quarter LWAY had cash flows from ops of $304,000 which was attained with a Net Profit Margin of 10.4%, With the new facility now producing revenues I expect that to jump back up. If I have been doing all of this figuring correctly, LWAY can easily afford a growth rate of 50% and beyond. There are other factors that come into play of course like increased advertising expenses, the hiring of more employees and others that I can't even think of. If anyone knows more about computing costs for growth I would be interested in your opinion. I wonder if I should take all of my profits from LWAY and put them down on the Pass Line on the craps table. No I think I'll keep them right where they are. Talk to everyone later. Mark