Currently, ABS Company has an issues with the working capital. ABS is running the food manufacturing. The firm only has RM20,000 cash in the bank and the critical problem faced with its account receivable. Its day sales outstanding is 55 days compared to industry 25 days. Its turnover ratio is only 5 times compared to the industry 12%. Currently, the firm do not invest in capital market or money market. Required: As a finance manager in the company, you are required to determine the problem may arise in the company and to overcome the issues. Assess your above findings and present to your CFO.

Currently, ABS Company has an issues with the working capital. ABS is running the food manufacturing. The firm only has RM20,000 cash in the bank and the critical problem faced with its account receivable. Its day sales outstanding is 55 days compared to industry 25 days. Its turnover ratio is only 5 times compared to the industry 12%. Currently, the firm do not invest in capital market or money market. Required: As a finance manager in the company, you are required to determine the problem may arise in the company and to overcome the issues. Assess your above findings and present to your CFO.

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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Bakers Industries believes that its two primary product lines, pastries and savory food, are rapidly becoming outdated. Its free cash flow is rapidly diminishing as it loses market share to new firms entering its industry. Bakers Industries has OMR 375 million in debt outstanding. Senior management expects the pastries and savory food product lines to generate OMR 48 million and OMR 29 million, respectively, in earnings before interest, taxes, depreciation, and amortization next year. Senior management also believes that they will not be able to upgrade these product lines due to declining cash flow and excessive current leverage. A competitor to its pastries business last year sold for 19 times EBITDA. Moreover, a company that is similar to its savory food product line sold last month for 22 times EBITDA. Estimate Baker's breakup value before taxes.
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