Emerson Engineering Ltd. - Case study
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1) What evidence is there in the case to suggest that Emerson is overtrading?
Working capital 2002 +342.000 £
Working Capital 2003 -2.108.000 £
The working capital of a company measures its efficiency as well as its short-term financial health. As the working capital of Emerson developed highly negativ the company can not even pay short-term depts and therefore they have got a cash-flow problem. A reason for this development could be, that companies they are selling to have a long time to pay for goods or products they have already received (high term of payment). Even though Emerson sells many products and needed to expand the high term of payment led to cash-flow problems.
3)
- more staff
- more overtime
- new machinery
Working capital 2002 +342.000 £
Working Capital 2003 -2.108.000 £
The working capital of a company measures its efficiency as well as its short-term financial health. As the working capital of Emerson developed highly negativ the company can not even pay short-term depts and therefore they have got a cash-flow problem. A reason for this development could be, that companies they are selling to have a long time to pay for goods or products they have already received (high term of payment). Even though Emerson sells many products and needed to expand the high term of payment led to cash-flow problems.
3)