In the Business Strategy Game there are a large host of people who wonder if whether it is better to sacrifice net profit for a large cash reserve or to deplete a cash reserve for the sake of a slightly higher net profit.
The answer to the question is extremely critical for anyone who wishes to win the game on bsg-online. A large cash reserve and no debt is able to raise your credit rating to a very high level and you’re able to get points. Whereas having a good net profit raises EPS, RoE, and stock price (to a lesser extent). Ultimately it is far more worthwhile to have a higher net profit than a large cash reserve.
This question can evolve is that is it better to have a high net profit at the expense of great debt? In my experience as a BSG Grand Champion, I've learned that it is better to see your company loaded with debt to create a high net profit than be a blue chip “no debt” company with mediocre profits. Too many people believe that having no debt is this awe inspiring feat.
In Finance class you will probably learn that debt is a financial lever. Using debt to bolster your company with greater abilities leads to greater net profit which in turn pays off the debt in time. A company does not need to be debt free to be extremely successful and capable of an A+ credit rating in the industry.
The Grand Champion of The Business Strategy Game and The Glo-Bus Simulation Game
The answer to the question is extremely critical for anyone who wishes to win the game on bsg-online. A large cash reserve and no debt is able to raise your credit rating to a very high level and you’re able to get points. Whereas having a good net profit raises EPS, RoE, and stock price (to a lesser extent). Ultimately it is far more worthwhile to have a higher net profit than a large cash reserve.
This question can evolve is that is it better to have a high net profit at the expense of great debt? In my experience as a BSG Grand Champion, I've learned that it is better to see your company loaded with debt to create a high net profit than be a blue chip “no debt” company with mediocre profits. Too many people believe that having no debt is this awe inspiring feat.
In Finance class you will probably learn that debt is a financial lever. Using debt to bolster your company with greater abilities leads to greater net profit which in turn pays off the debt in time. A company does not need to be debt free to be extremely successful and capable of an A+ credit rating in the industry.
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