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1, Evaluate Anacomp’s new product development strategy. What are the risks and benefits of this, strategy for Anacomp’s shareholders? Amacomp is aggressively acquiring new companies and technologies. The company and the sharcholde sould be better servad if the purchases were done with less debt and more earefully consideration of the price and if there were any conflicts of interest. There were significant conilicts of interest in all of the acquisitions made in 1981. Many company officers had controlling interests in the companies being bought. Additionally the company grossly overpaid for the CIS system. The agreement was 6 million a in the end it was 16 million paid out for the software. The company had taken too long to amortize its software purchases, it used straight line deprecation over 5-10 years. A double declining balance over a 5 year period would have heen batter due to the rapid changed in technology at the time. Ancther problem with the company is with ‘other debt” which included mortgages, capital leases and equipmet purchase notes. They have an effective cost between 9.75% and 15% interest costs until 2006. I'm also unclear why the company split the stock two years in a row. The shareholders would have better serve if the stock had not split at all. 2. How is Anacomp’s accounting influenced by the way the company organizes and finanees its new product development? Anacomp’s accounting is influenced by its extremely aggressive acquisition policy. I feel the company has put the horse before the cart, It used very aggressive debt financing to make purchases in an environment that was changing rapidly. It also did not have software that was proven to be effective a wwe saw in the CBIS deal where the company agreed to develop software that they could not reasonably guarantee would work. 3. Compare Anacomp’s cash flow performance with its accounting performance, What is your evaluation of the company’s financial condition? Anacomp’s eash flows and accounting are worlds apart in my opinion. The revenue recognition is sour on the surface but once its clear how much they will be paying out in interests cost due to their excess debt and there overpayments for software. The company should be create software and then selling or licenseing it. Anacomp is trying to ell software before they created it. iT) 4 rit Her my 4