Financial

Case II

FNBK 4150

Clifton Controls

Although he was hired as a financial analyst after completing his bachelors degree, George Well’s first assignment at Clifton Controls was with the firm’s marketing department. Historically, the major focus of Clinton’s sales effort was on demonstrating the technological superiority of the firm’s product line. However, many of Clifton’s traditional customers have embarked on cost-cutting programs in recent years, and as a result, Clifton’s marketing director asked Well’s boss, the financial vice president, to lend Wells to marketing to help them develop some analytical procedures for the sales force to use that will demonstrate the financial benefits of buying Clifton’s products.

Clifton Controls manufactures fluid control systems that are used in a wide variety of applications, including sewage treatment systems, petroleum refining, and pipeline transmission. The complete systems include sophisticated pumps, sensors, and control units that continuously monitor the flow rate and the pressure along a line, and automatically adjust the pump to meet preset pressure specifications. Most of Clifton’s systems are made up of standard components, and most complete systems are priced from $50,000 to $100,000. Because of the highly technical nature of the products, the majority of Clifton’s sales force have backgrounds in engineering.

As he began to think about his assignment, Wells quickly came to the conclusion that the best way to “sell” a system to a cost-conscious customer would be to conduct a capital budgeting analysis which would demonstrate the system’s cost effectiveness. Further, he concluded that the best way to begin was with an analysis for one of Clifton’s actual customers.

From discussions with the firm’s sales people, Wells concluded that a proposed sale to Atkins Chemical Company was perfect to use as an illustration. Atkins is considering the purchase of one of Clifton’s standard fluid control...