Chicken Run Essay

The implications if a major customers had gone into is level, it impart affect the order cash lessen because every retribution received the political party may amaze to use it to cover its operational expenses apart from getting scratch. roll up debtors will show the collection department performance. Low cash flow will affect many areas in an organization. The friendship may issue to make another loan to run it business. Other than that it may feed worry to run the business if the cash flow is low. For pillowcase, if the company unable to pass on the suppliers on time. The supplier may stop to supply harvest-home to the company. If the suppliers re all(prenominal)y stop supplying product, the company may face problem to produce product. This will directly affect the company sales because its afford out to produce product to its customers. If the company do not work wicked to reduce this important area they may be looking at legal remedies, or even write off de bts and that means expenditure money to get money.The other implication is that, the company will pay a very unhealthy debtors aging. Where it is supposed to be a guidelines to the company. For example when a debtor reach it strangle, the company should be alerted to dog payment based on the debtors aging. But in this case, Encik Selamat has been bad authority to the marketing department to continue supply products to Cold fortunate Sdn Bhd because of the closed relationship. Indirectly, it showsthat Encik Selamat does not performing his duty rationally. Which effect his image as a manager. He is supposed to show his leadership by having a very good judgement. For example to stop supply products to Cold bills Sdn Bhd until they settle their debts.Refer to the case Chicken Runi) How would you quantify the pecuniary health of the company?I would assess the financial health of the company based on the gross profit of the company. The higher the gross profit the healthier it is. Of unravel we bemuse to consider the operating expenses of the company that operating expenses are still under the company control and ingenuity before we can get the can profit.Other than that, I would assess the financial health of the company by obtaining a history of your companys financial statements. Five years worth is usually a good base. Next, convert the financial statements to common size. Common size financial statements are simply a companys financials expressed in the form of percentages rather than dollars. A common size format quickly identifies trends and growth patterns. Additionally, since industry benchmark data is often produced in this format, it makes it easier to par the results with the competition. Industry benchmark information can be obtained from a commercialized vendor, accountant, or depending upon the industry, from trade associations.Next, financial ratios are calculated. There are a number of ratios to choose from. Some of the more commo n measure liquidity, debt coverage, leverage, and operating and profit performance. Their relevance is dependent upon your company, its operating characteristics and the industry. Bankers and accountants can be curiously useful in identifying the more pertinent ratios.The information gathered frankincense far is analyzed and compiled on a trended, composite and industry basis. The results of this analysis, when performed regularly, serve well you to monitor and recognize the vital statistics necessary for the success and growth of your business. The benefits of this mind include Competitive Advantages & DisadvantagesAn industry assessment enables you to identify your companys strengths and weaknesses and acquire valuable information on the competition.Budgeting & prodigyStudying trends and growth patterns is a very effective preliminary ill-use in preparing endureledgeable budgets and forecasts.Strategic PlanningRecognizing specific performance measurements (company and industry) will help to set goals and objectives for the future (e.g., increasing sales, gross profit margins, and net income).Acquisition OpportunitiesKnowledge of key performance measurements assists in the evaluation of a proposed sale, merger or acquisition.FocusGreater consciousness of the interrelationship of the financial statements and a complete understanding of financial operations allows you to focus on the areas important to the growth and success of your business.ii) What would you suggest as appropriate course of actions?As an appropriate course of actions, I would suggest the directors to refer the Malaysian Code on Corporate Governance 2012 as a guidelines to take action against Encik Selamat which involves in unethical activities such(prenominal) as conflict of use up and lack of integrity.Other than that, the internal control of the company should be revised. For example the debtor collection procedures. It has to companion proper standard operating procedur es such as when invoices issue to a customers, the payment terms must follow the credit period. either payment overdue must be chase every month. If it reach the 120 days amount overdue, warning garner should be issue to the debtors, then stop supplying product to the debtors until payment made.Besides that, Internal Audit must be done regularly. This is to scrutinise the operation run based on the standard operating procedures. Any discrepancy found must be rectify immediately to revoke any unwanted issue to happen. For example, Ms Choy has discovered that the credit limit of Cold Gold Sdn Bhd, one of its major customers had gone into its level and save the marketing department continued to supply products to the company. If the company do internal audit regularly, this issue may not happen because the internal listener will detect the problem while it is still under ahead of time stage. Other than that, this will avoid Encik Selamat from making unethical activities due to his awareness from the internal auditor.Monthly meeting also can help in this case. Where, Encik Selamat required to report the company performance monthly. In this case, the company should have monthly credit meeting. The purpose of this meeting is to make sure all debtors are monitored closely. Any amount hanging in the debtors aging should have remarks or the status should have been identified. For example, if the debts is not paid within the 30 days period, it should state the reason why? At least we know that chasing of debts run actively by the collection department. If the debtors do not pay according to their credit period, the management at least can give suggestion and acknowledge about that issue.