Mas Cash Flow Problem and Solutions

MAS Cash flow problem and solutions

Cash flow for investing activities primarily reflect proceed or payment of capital assets for a company. It is important for a company to be able to generate cash inflow from its operating activities instead of investing or financing activities. This is because they are vital sources of internal finance. Cash inflow for operating activities helps organization to sustain its operating activities, service debts, repay loans, pay dividend and make capital investments without option to external funding (Cash flows from operating activities, n.d.).

MAS should collect cash from other revenues such as providing more services for the passengers besides the flight ticket. Thus, MAS can enhance its value of the company and increase the cash from operating activities. For example, MAS may provide catering services to their travelers. Besides, MAS may collaborate with the bus companies and hotels to offer the transport services to their passengers to create the full Services Package. MAS also should give promotion to the customers during peak season and low season. Therefore, it can attract different levels of customers.

To able to generate cash inflow from its operating activities, we recommend that MAS should replace the short term debt to long term debt. MAS is not being paid to their suppliers prior to require payment dates. Thus, MAS has enough cash to maintain its operating activities. Besides that, MAS’ customers will give all kinds of excuses to pay late. MAS should monitor its account receivables to make sure every debtors is adhering to the agreed upon credit terms and that the terms are steady because MAS need to get those receivables turning to cash. Then, MAS should reduce the balance required in the current account of Allowance for Doubtful Debts. On the other hand, MAS should review the turnover of each and every items may allow MAS to reduce the inventory quantities thereby freeing up cash that would have been sitting in inventory. Decrease in inventory can increase the cash inflow from operating activities.

Besides that, MAS should implement cash-focused management system by using the key performance indicators to ensure the KPIs are aligned with individual managers’ responsibilities. Thus, MAS should provide awareness training and activity training at operating level to the top management.

From the investing activities perspectives, in FY 2002, Malaysia airline suffer from negative cash flow from investing activities due to purchase of aircraft and payback debt with proceed from borrowing. The same problem happens to MAS in year 2005 for purchase of A380 and 2010 to 2012 for the sign up of purchasing of 15 Airbus A330 and caused high gearing level. In year 2003, the implementation