Wellington’s Funds Flow Statement (Statement of Cash Flows)
Sources
Earnings after taxes $ 80
Depreciation 84
Decrease in accounts receivable 42
Increase in accounts payable 13
Increase in notes payable 196
Increase in accruals 22
Increase in long-term debt 7 .
Total sources $ 444
Uses
Purchases of gross plant (Add Dep) $ 392
Increase in inventory 14
Dividends paid 38 .
Total uses $ 444.00
The firm's liquidity problem stems from a low working capital. This is evident because of the high cash expenses and very little cash income. They could improve their liquidity by taking out a loan or tap their reserves if they have any.
Question 5. Discuss how to solve the airline’s most pressing problems.
just need help with the last question thanks
To solve the airline's most pressing problems, there are a few steps that can be taken:
1. Increase cash flow: Since the airline has a low working capital, it is crucial to improve the cash flow. This can be done by implementing strategies to increase revenue, such as offering discounted fares or attracting more customers through marketing initiatives.
2. Reduce expenses: Analyze and identify areas where expenses can be minimized without compromising the quality of services. This can involve negotiating better deals with suppliers, optimizing fuel consumption, reducing unnecessary overhead costs, and implementing cost-saving measures throughout the organization.
3. Improve collection of accounts receivable: The airline should focus on diligent and timely collection of outstanding payments from customers. This can be achieved by implementing strict credit policies, offering discounts for early payment, and actively following up on overdue payments.
4. Optimize inventory management: The increase in inventory can tie up a significant amount of working capital. The airline should regularly assess and manage its inventory levels to ensure they are aligned with demand. This can involve implementing efficient inventory control systems, analyzing historical sales data, and adjusting procurement and stocking strategies accordingly.
5. Debt management: If the airline has a high level of debt, it may be necessary to negotiate with creditors to restructure or refinance the debt to alleviate financial pressures. This can involve renegotiating payment terms, interest rates, or extending repayment periods to improve cash flow and reduce financial strain.
6. Seek external financing: If the airline's internal resources and cash reserves are insufficient to address the pressing problems, exploring external financing options such as obtaining a loan or seeking investors could help improve liquidity and provide the necessary funds to overcome the challenges.
Overall, it is essential for the airline to adopt a comprehensive approach that includes increasing revenue, reducing expenses, improving cash collection, and optimizing financial management strategies to solve its most pressing problems.
To solve the airline's most pressing problems, such as their low working capital and cash flow issues, several steps can be taken. Here are some possible solutions:
1. Improve revenue generation: The airline can focus on strategic marketing and pricing strategies to attract more customers and increase sales. This might involve reviewing ticket prices, offering promotions or discounts, or targeting new customer segments.
2. Efficient cost management: The airline should analyze its expenses and identify areas where costs can be reduced without compromising the quality or safety of operations. This could involve renegotiating contracts with suppliers, optimizing fuel consumption, or streamlining internal processes to reduce operational expenses.
3. Optimize cash management: The airline should closely monitor its cash flow and implement effective cash management practices. This includes managing accounts receivable and accounts payable more efficiently to improve the collection of outstanding payments and delay payment of invoices when possible.
4. Financing options: The airline can explore options for obtaining additional financing to increase its working capital. This could involve obtaining loans, negotiating credit terms with suppliers, or seeking investment from external sources. It's important to carefully evaluate the terms and conditions of any financing options to ensure they are suitable for the airline's specific situation.
5. Focus on customer retention: Building strong customer relationships and focusing on customer retention can help stabilize revenue and reduce the effects of fluctuating demand. Providing excellent customer service, loyalty programs, and personalized offerings can help establish a loyal customer base.
6. Long-term planning: The airline should develop a comprehensive long-term plan that includes financial forecasting and strategic goals. This will help management make informed decisions, anticipate potential challenges, and implement measures to mitigate risks.
It's essential for the airline's management team to thoroughly analyze the current situation, prioritize the most critical problems, and develop an action plan with specific steps and measurable goals. It may also be beneficial to consult with financial advisors or industry experts to provide insights and guidance during the problem-solving process.