Summit Partners Case Solution And Analysis, HBR Case Study Solution & Analysis of Harvard Case Studies

Summit Partners Case Solution

The tax rate was given as 40% in the case study and cost is assumed on an average basis. If we evaluate the overall performance; we can see that the internal rate of return (IRR) for Debt holders is 5%, while for equity holder, it is 9%. The conclusion is that the equity holders are on the beneficial edge as compared to the debt holders.

Sources and Uses of Funds

Main funds through

Growth equity, provided by the firm
Venture capital.
Credit for growth.
Management buyouts.

Additional funds

The company earns through charging profit on the margin of cost and providing data-center automation to different firms.
It also provides business intelligence, which helps the firms to improve their artificial intelligence and also downsize their overall cost.
The company also provides consulation for the security software solutions.

Usage of funds

The company invests in different companies through funding them, which is why the company has investments in over 340 companies.
Third-party financing for Summit’s equity fund investments and for investing in Summit’s subordinated debt funds.

Investment Performance

By analyzing the company’s position in terms of both the investments; it is visible that after investing in equity funding; the IRR is greater as compare to the Debt financing. The higher the return; the better the company’s profit.

Risk and Return

Returns on Equity Funding

It categorically outlines the percentage return earned by the equity shareholders.
Investors compares the performance of different equity investments with the Return on equity’s help, which also influences the investor’s future investment strategies.
As an investor, Return on equity can benefit you, because it allows you to benchmark the companies’ performance against each other.
This allows you to perform a quick analysis of the stocks and gives you details for a major investment.
Return on equity can be used to decide the performance of a company's manager.Those managers are more efficient who create more profits from investments. If a company has a higher return on equity, it means, its managers are more efficient according to the author of "Principles of Accounting,"

Risk of Equity Funding

The risk of Equity funding is that, in the initial days of a new companies; the requirement of capital is high, which reults in lower ROE. It also misleads the companies by manipulating the ROE and using many accounting caveats like increasing the project’s life and decreasing its depreciation rate................................
Summit Partners Case Solution
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Summit Partners Harvard Case Solution & Analysis