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BUS312 - outflow obligations An increase in inventory...

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BUS312-01 Gracer Yung Joon Hyun Kim (ID#105634094) In the given financial statement of cash flows, there are some problems. The biggest problem that I found was too much accounts receivable. Accounts receivable represents sales that have not yet been collected into cash. This company earns quite lots of revenue but so many account receivables make company unstable. If this company normally extends credit to its customers, then the payment of accounts receivable is likely to be the single most important source of cash inflows. In the worst case scenario, unpaid accounts receivable will leave this company without the necessary cash to pay its own bills like accounts payable which is quite a lot(7,722,452). More commonly, late-paying or slow-paying customers will create cash shortages, leaving your business without the cash necessary to cover its own cash
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Unformatted text preview: outflow obligations. An increase in inventory signals that a company has spent more money to purchase more raw materials. If the inventory was paid with either cash or credit, the increase in the value of inventory is deducted from net sales or increasing account payable. Also this company spent too much money for purchasing inventory, even though they have a lot of account receivable and account payable. And I don’t know why this company puts “other” in statement. “Decrease in other current assets” this company has to specify which current assets were decreased. Investors don’t see this word “other”. They would not like this. Finally, the net cash by operating activities are negative to 9,216,891. Even though, they earned lots of revenue, they have very dangerous status that they don’t have enough cash to pay their bills....
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