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Untrustworthy International Group: Case Study
After reviewing Fly-By-Night International Group's financial claims there was a lot of evidence that signaled the cash movement problems skilled in mid-year 14.
The 1st problem I actually encountered was your company's accounts receivable experienced steadily improved, rising more quickly than product sales from season nine through year 18. The stocks also increased during the same time period. When ever accounts receivable is increasing faster than sales what this means is that Fly-By-Night was not aggressively collecting funds from its consumers thus probably indicating loose credit terms for customers. Also inventories had been rising faster than product sales. This mentioned that the organization was producing more items than were in demand. In both of these situations the cash is tied up exactly where it are unable to generate a return for the corporation.
Secondly, the company's debt experienced steadily increased indicating that the organization was dealing with more financial debt than it might handle. This along with lower product sales indicates the possibility of a earnings problem. The organization could have perhaps managed this debt better by successfully managing its inventory to not produce much more than was needed and also tensing the credit rating terms for customer so more cash could be generated in the company.
Another cause for concern is the company, while exhibiting a positive net income for the three years ahead of year 16, the cash that the company got on the "balance sheet" was lower than the net income. In year 14 the company showed money on the balance sheet of $159, 000 but net income was negative $3. 83 million. Companies include a way of manipulating net income but it is much harder to manipulate funds on the balance sheet. Looking at a company's cash on a balance sheet is a greater indicator of economic health more than net income.
The company, in order to avoid bankruptcy, will need to change the design and style by fortifying credit terms in order to get more money into the firm faster,...