Quick check: am I going to run out of cash?
Take these from the proforma cash flow statement Capsim generates before you commit the round. If the proforma already shows your ending cash, this tab tells you what it means and what to do about it.
Full cash flow statement, line by line
This rebuilds the whole statement so you can see which activity is draining cash. Leave anything that does not apply at zero.
I am short. What is the cheapest way to close the gap?
Every route out of a cash shortfall has a different cost and a different side effect on your Balanced Scorecard. This ranks them for your situation.
What Is a Capsim Emergency Loan?
If your company runs out of cash during a round, the simulation does not let you go bankrupt. Instead a character called Big Al steps in and lends you exactly enough to get to zero. He is not a philanthropist. The loan is expensive, it appears on your balance sheet as current debt, it drags your leverage ratio, and it is flagged as its own scored category on the Capstone Analyst Report. Instructors notice it immediately.
Why teams end up there
Almost never because the company is unprofitable. The usual sequence is a team that buys capacity and automation in the same round, produces to a forecast that turns out to be optimistic, and funds all of it from the cash balance rather than raising long-term money first. Profit looks fine on the income statement while cash quietly goes negative, because plant purchases and inventory build never appear there.
The three things that drain cash without touching profit
- Plant and automation purchases. A capacity expansion is an investing outflow. It shows up on the balance sheet and then trickles through the income statement as depreciation over many rounds.
- Inventory build. Every unit you produce and do not sell converts cash into stock. Overproduction is a cash problem before it is a profit problem — build the number properly in the sales forecast calculator.
- Debt retirement and dividends. Both are financing outflows that bypass the income statement entirely.
The formula this calculator uses
Ending Cash = Opening Cash + Net Profit + Depreciation − Increase in Inventory − Increase in Receivables + Increase in Payables − Plant Purchases + Plant Sales + Stock Issued + Bonds Issued + Current Debt − Stock Retired − Bonds Retired − Dividends.
If that total is below zero, the shortfall is what Big Al lends you.
How to Avoid the Emergency Loan
| Route | Cost | Side effect |
|---|---|---|
| Spend less on plant this round | Free | Delays capacity you may need next round |
| Produce less | Free, and saves carrying cost | Risk of stockout if the forecast was right |
| Issue long-term bonds | Interest, plus a small issue fee | Raises leverage; cheapest way to fund plant |
| Issue stock | Small issue fee | Dilutes EPS, which can pull your stock price down |
| Take current debt | Interest, repayable next round | Fine as a bridge, dangerous as a habit |
| Big Al's emergency loan | Highest rate of all | Scored against you and visible to your instructor |
The rule that prevents almost every emergency loan
Fund long-lived assets with long-lived money. If you are buying capacity or automation that will serve you for the rest of the simulation, raise bonds in the same round rather than draining the cash balance. Teams that follow this rule in rounds one to three almost never see Big Al, and they still have borrowing capacity left when a genuine opportunity appears in round five. Before committing to the purchase, check it in the capacity vs second shift calculator and the automation payback calculator.
Keep a cash cushion
Capsim also penalises holding far too much idle cash through the days of working capital metric on the Balanced Scorecard, so the aim is not to hoard. A working cushion of roughly one round's operating costs is enough to absorb a forecasting miss without tipping into a loan.