Company History Analysis

Company History Analysis (from January to June)

There are four things that the company has done badly in the previous six months that has put the company into a Cash Flow Crisis.

1. The company started well off with amount of EURO10502 cash in the bank in January. However, during the first few months, that is from January to April, there are too few orders which make the company to continue being unable to make a profit to pay off its fixed cost. This results in the draining of the company cash reserve and resulted in a low bank balance.

2. The expanses of the company in the first two months, i.e. January and February is too much. It has spent EURO2141 and EURO7048 respectively in these two months even though only 2 products were in production and was sold totally, amount to a total sales value of EURO1092. This is especially worse in February, where there is no order, but the company has spent EURO7048, which is 67.1% of its total bank balance. This has resulted in a sudden shortage of cash, and reduced the cash flow significantly.

3. The third thing that caused the problem is the amount of cash unpaid by the debtors of the company. By June, a total amount of EURO5610 is unpaid by the debtors. This amount is equal to around 200% of its current bank balance in June. It is because the company allows the debtors to own it so much overdue payment that caused the company to run into the cash flow crisis.

4. The forth thing that caused the problem is the amount of the money owned by the creditors. As seen in June data, a large amount of EURO5550 is owned by the creditors who are mostly suppliers of the company. If the company doesn’t pay the overdue payment on time, then the supplier will not deliver the components to the company on time, and that will most definitely hurt sales and company reputation. So the company had to pay the creditors