University of Michigan, Dearborn
ACC 505
Anandam Manufacturing Company: Case Study
Professor – Matthew Hayes
Submitted by – Priyank Patel
UMID – 35922587
1) Prepare and analyze the statement of cash flow for the company for the 2 years (2013-14 and 2014-15)
As per the case and available data, below is the statement of cash flow for the year 2013-14 and 2014-15. Cashflow from operating activities –
As we know that cash flow from operating activity indicates the money or bucks generated by the company’s regular operations like manufacturing or selling goods or providing a service. As per the above statement since the cash from operating activities is increasing, which means company is performing well and their operational efficiency …show more content…
As we could see from above analyses, that the company’s current ratio is decreasing year by year which represents the company is not able to payback for its short-term debts. Compared to industry average of 2.30, Anandam’s current ratio is 1.60 in the year 2014-15, which is less, not a positive sign for the company.
When we observe the quick ratio, the value for quick ratio is also decreasing yearly which means company is facing issues in managing the liquid funds. Anandam’s quick ratio in the year 2014-15 is 0.79 which is again less compared to industry average of 1.20 which means company is having troule managing the …show more content…
As the receivable turnover ratio is decreasing for three consecutive years, company’s cash inflow from the customers is not happening on proper time. This shows the poor credit policy of the company.
Also, the inventory turnover ratio is reducing which means firm is not able to sell its inventory and the stocks are getting piled up in their factory. Inventory turnover ratio for Anandam in the year 2014-15 is ‘2.56 times’ which is very less compared to Industry average of 4.85 times.
With this, we can conclude that as Anandam is not having proper system to manage its funds and, they are not able to collect the money from the customers on time. Also, the huge stock is piled up in their factory which they are not able to sell. Considering all these factors, I would recommend ‘not to sanction the loan’ to the company.
6) How might Anandam improve its financial
ACC 505
Anandam Manufacturing Company: Case Study
Professor – Matthew Hayes
Submitted by – Priyank Patel
UMID – 35922587
1) Prepare and analyze the statement of cash flow for the company for the 2 years (2013-14 and 2014-15)
As per the case and available data, below is the statement of cash flow for the year 2013-14 and 2014-15. Cashflow from operating activities –
As we know that cash flow from operating activity indicates the money or bucks generated by the company’s regular operations like manufacturing or selling goods or providing a service. As per the above statement since the cash from operating activities is increasing, which means company is performing well and their operational efficiency …show more content…
As we could see from above analyses, that the company’s current ratio is decreasing year by year which represents the company is not able to payback for its short-term debts. Compared to industry average of 2.30, Anandam’s current ratio is 1.60 in the year 2014-15, which is less, not a positive sign for the company.
When we observe the quick ratio, the value for quick ratio is also decreasing yearly which means company is facing issues in managing the liquid funds. Anandam’s quick ratio in the year 2014-15 is 0.79 which is again less compared to industry average of 1.20 which means company is having troule managing the …show more content…
As the receivable turnover ratio is decreasing for three consecutive years, company’s cash inflow from the customers is not happening on proper time. This shows the poor credit policy of the company.
Also, the inventory turnover ratio is reducing which means firm is not able to sell its inventory and the stocks are getting piled up in their factory. Inventory turnover ratio for Anandam in the year 2014-15 is ‘2.56 times’ which is very less compared to Industry average of 4.85 times.
With this, we can conclude that as Anandam is not having proper system to manage its funds and, they are not able to collect the money from the customers on time. Also, the huge stock is piled up in their factory which they are not able to sell. Considering all these factors, I would recommend ‘not to sanction the loan’ to the company.
6) How might Anandam improve its financial