Company background:

Flash Memory, Inc. is a small firm operating in the computer and electronic device memory market. The
company operates in a market that experiences continuous change and products become obsolete at a
very fast pace. There is also a high degree of rivalry within the industry and a drive to come up with
technologically superior products.

Issues:

Hathaway Browne, Chief Financial Officer of Flash Memory Inc., has two major tasks ahead of him . He
needs to finance the growth of Flash’s existing product lines at he same time investing in new products
to gain competitive edge. However this required large investments in working capital. Recently the bank
loan officer had informed Browne that they had reached the limit of the banks ability to extend credit.
Furthermore internal cash flows were not enough to fund the projected growth.

Options:

Flash has two main options when it comes to financing the new product line: Factoring, as suggested by
the bank and equity financing.