AppLIED 3000 word Essay Example | Topics and Well Written Essays - 3000 words

AppLIED 3000 word - Essay Example The report also includes a proposed budget for the year 2010-11 which will help to give an idea about the decisions taken by the management to improve the situation. Hard cash or liquid cash is required by any business organization to survive or to run successfully. Normally, most of the companies keep a lump sum amount of cash at their disposal for the daily expenses of the business. It ensures the smooth running of daily business operations. But, the financials of Cyclermate Ltd gives a shocking picture. There is only 675 pounds of hard cash left in the bank. With such a meager amount as its savings the company cannot even run a single day’s operation. The company is on the verge of close down. Mismanaged budget, uncontrolled cost and lack of proper supervision have lead to such a dismal situation. It is clear from the income statements of the last five years that selling price and total sales of the articles have gone down while total costs have shown a steady rise. The financial ratios also bring out the same poor condition of the company. The company’s Acid Ratio which is the relationship between the current assets (stocks not included) and current liabilities is 0.76:1. The Acid Ratio of 0.76:1 shows that the company will not be able to any financial problems nor needs that may rise in the near future (Netmba, 2010). The relationship between revenues and total assets is known as Asset Turnover Ratio. This company has an Asset Turnover Ratio of 2.06:1. The main reason for this ratio to be so high is the poor profit margin. There is also a possibility that the company is following a faulty a pricing strategy for its products. From the income statement of the past five years the return on capital employed is calculated as low as 0.11. The company is getting only a return of 11% on the capital it is employing which is not at all satisfactory. The debtors to the company generally