Company report, and recommendations to increase profit

The report aims to provide recommendations and step that the company needs to follow to help it in scaling its operations. Based on the analysis, the business performs much better in most of the categories. However, there exist a few areas that still need to be polished to ensure that the industry regains the track and be on a profit mode. The report also focuses on the recommendations that will ensure that the company regains its average performance. The report, therefore, serves as a corrective mechanism that if adopted by the business management, the business will be in a position to profit once more. According to the report, the significant findings are as below:

  1. The company incurred losses on the operations in FY1
  2. There were substantial write-downs that needed much evaluation on the valuations before the assessment
  3. The business generated earnings before interest and tax of $18.8 million which is a drop from $22.7 for FY17
  4. The company had changed the methods of procurement of the resources and the primary production materials.
  5. The company in 2018 February sold part of its portfolio that was making a loss at the cost of $7 million.
  6. The company again sold part of its venture that was making a loss to Caravan manufacturing in June 2018 to Apollo Tourism and Leisure for $1 million.
  7. After raising capital in June 2018, the business further acquired Sydney based modular building systems for $34.2 and another investment in Melbourne for $10.
  8. The continuing operations which had been treated as discontinued operations made the business to have a reduction of profit and a reduction of the net tax payable.
  9. The statutory net profit after tax reduced significantly based on comparison with 2017 as the base year. There was a significant increase in the loss from discounted operations for the year 2018, which is a sign of underperformance.

Leadership criteria.

Based on the report, the stakeholders will focus on scrutinizing the kind of leadership style applied that makes the business performance to drop significantly. It is essential to evaluate the protocol for decision making within the company to avoid making mistakes that may cost the company revenue. It is also essential to evaluate how you make decisions and ensure that you do not rush to conclusions. Based on the previous poor performance, the report will highlight on how you need to handle the risk of failing as a recommendation. As the CEO, it is important not to gamble with emotions to ensure that you do not repeat the past poor performance on making a new decision. As the company’s chief accounting officer, it is essential to look at the advisors that surround you to allow proper dissemination of the kind of information given regarding investments and divestitures. The performance not only define the kind of leadership the CEO provides, but it also defines those who surround you as the company head. The company values are also of significance in the determination of how the business achieves its goals. The objectives, mission, values, and goals may seem secondary but plays a vital role in the determination of the company’s strategic direction. Based on how the company scaled up the operations and scaled down part of the portfolio, the CEOs advise essential before making such moves based on the leadership sty adopted when making such kind of a decision. The leadership style should be that of single-mindedness and persistence while ensuring that there is compliance with the vision and mission. It is essential for the business to participate in the leadership programs that can teach one on the competencies required and help in identification of the signature strengths and any limitations available. The leadership programs for the assessments are essential in knowing the competencies possessed by the staffs, clarification of the tools needed in conducting change, and knowing good leaders as well as understanding the areas that need change. The production team also need to be highlighted on the technological means of production to help them in becoming more innovative in their means.

The business revenue has had a significant drop since 2017, which calls for immediate redress. The reduction is an indication that the current annual revenues still cannot sustain the yearly operating expenses before interest and tax. The gross margin, therefore, needs to be increased by making further attempts to reduce the variable costs and the costs of sale. A reduction in the variable expense is an essential step towards adjusting the net profit for the company. Either, the Fleetwood Corporation can decide to engage on intense promotion and advertisement to help in increasing the net revenue.  However, the cash flows for 2017 recorded was $5.9 whereas that of 2019 was $17.9, which may be as a result of the fixed asset disposal and sale of the other poorly performing portfolios.

Income statement

The company does well in capital management to ensure that it will not continue being a going concern.  Fleetwood tries to maximize the returns by trying to optimize debt and equity balances. The optimization of the debt balance may affect the liquidity of the business. The business should strive to ensure that the operations are controlled based on the profits and not being dependent on the debt as a source of revenue. Analysis of the parent plant shows that the current assets are on the decline, whereas the current liabilities are on the rise, which needs evaluation and analysis to address the concern. When the current liabilities are more than the existing assets, it is an indication that the business is not in a position to settle the short term obligations. The deeds of cross guarantee compel the company to pay its debts in full in the event of winding up of any part of its subsidiaries under the Corporations Act (2001). In case the winding up of the company happens under other provisions different from the provided Act, then the company will only be liable if after six months any creditor has not paid in full.  Fleetwood’s creditors have also the same guarantee which needs to be terminated since the sectors are not all performing well.  The company’s comprehensive financial statement for 2018 indicates a drop in the performance based on the net revenue and profit. In 2017, the net income was $324592 whereas that of 2018 was $261239, which is a drop. The 2017 net profit reported was $3110 whereas that for 2018 was a massive loss of $14044. With such a performance, the business is not in a position to pay dividends to its shareholders. It is forced to borrow or seek other means of settling the payments to avoid any form of liquidation.

Depreciation recognition

Fleetwood Corporation needs to prepare an internal version of the profit and loss statement. The statements should come from all the division managers. To ensure that the company gets the real figures of the performance for the company, all the departmental managers needs to submit their individual reports on revenues and expenses. However, the reports need not contain the depreciation expense depreciation is anon cash expense which should feature in the comprehensive annual report for the Fleetwood. The asset depreciation that needs to function on the departmental expenditure is that which is directly linked to the department usage on revenue generation. The payment for the assets to be depreciated however needs not to feature in the income statement as an expense. The business should focus on the real increase in the revenues and costs and specialize in the management of the assets that bring the firm more revenue. To understand how the operations of the line managers impact the organization performance, as the CEO, you need to instruct the departments to produce a report without the non-cash income and expenses. However, when preparing the statements, the management needs not to substitute the modified Generally Accepted Accounting Principles. The business needs to have more than a single view of the information within the profit and loss accounts but should not change the already set standards. When there are personal expenses within the income statement, the business needs to produce a proforma statement that includes a line for such costs to make clear the cash flow drain. The company can also decide to use EBITDA or, which excludes accounting for the depreciation expense. However, the situation will dictate the accounting for depreciation expense of which it will help in accounting for the different product lines and the assets that are owned by the firm. In the case of Fleetwood, the business has included depreciation as required since it is an asset-intensive product, thereby enabling the firm to get an unfair advantage. Since the company has different subsidiaries, the same situation can apply, especially when measuring against the budgets in case the company intends to have the projections to remain consistent. If the company used EBITA then later included depreciation in its calculations, then the departmental managers can improve the EBITA through postponement of the investments. Fleetwood has included amortization expenses for both the continuing and the discontinued operations within the financial statements. The costs have been reducing as the year’s progress. For instance, in 2016, the amortization expense for the continuing activity was $317, whereas in 2017, the amount reduced to $292. In the discontinued operations, the amount reported in 2017 was $9305 whereas in 2017, the amount reduced to $725, which is an indication of improvement. However, the business does not need to include the amortization expense for the discontinued operation in the financial statements. Their inclusion reduces the profits, yet the assets are not in use to help in generating profit. The other expenses that are related to impairment that the business reported include goodwill impairment, impairment of the intangible assets ad impalement of the plant, and equipment. The accounting standards require the company to continuously review the goodwill for impairment at least every year at the unit level. Different events may trigger goodwill impairment, which may include asset deterioration, economic condition, loss of the significant personnel regulatory action, and increased competition. The impairments are identified in tow steps, which include the company comparing the asset fair value of the reporting unit carrying amount within the balance sheet. The observable market values are always not available to help in determining the financial models for the assets fair value estimation. In case the fair assets value goes beyond the carrying value, then the company needs to report an impairment. However, the business is not allowed to write up its goodwill if there is no impairment. When the fair value is less than the carrying value, then the company needs to perform the second procedure of multiplying the fair value with identifiable asset value and the liability amount in the reporting unit. The excess in the balance should, therefore, be reported in the balance sheet as the new goodwill of which the carrying amount of the intangible asset should be reduced through offsetting the impairment charge. It is the same situation happens in Fleetwood. However, the company disposes of the assets after selling the portfolio, which reduces the goodwill value to zero.

Cash flow analysis

The financial statements indicate an increase in the number of inventories for the following years 2017 and 2016. The increase is reported in the cash flow by the outflow of the cash in the inventory segment. However, the company needs to strive to ensure that it does not retain much of the working capital in the current assets. The closing inventories should be maintained at the minimum level possible to avoid having old items in the stock and also losses as a result of the price fluctuation of the commodities. I have also observed that the business records an increase in the trade receivables for the consecutive years 2016/2017. In 2016/2016, the market managed to reduce the receivables by $55142, which is a significant boost to the company. 2017 recorded a poor performance by reporting an increase in the receivables by $25267. The figures published in the 2017 financial year is an indication of reduced accounts receivables management. There is a need to reduce the number of collection period days to ensure that the business has a smooth cash movement. Fleetwood’s needs to strive to have a less number of days for the account receivable to improve on the amount t of the working capital. As the CEO, you need to tighten the rules on the credit collection to ensure that the business does not have many defaulters on the debts. The cash flows also indicate an increase in the amount of the accounts payables. As a rule, the business needs always to avoid managing much of its operations on debt since it affects liquidity. However, on the credit payment period, the company needs to prolong the number of days it takes to repay the debts to help it improve on the cash flow returns. Fleetwood needs to avoid overreliance on the obligations and ensure it gets alternative means of raising capital other than debt finance.  The payables for 2016 as reported was an outflow of $1435 whereas 2017 indicated an inflow of $16584, which means there was an addition of cash from the credit source.

The business has other contingent liabilities of which it has guaranteed the repayment of the all the company’s non-current and the current obligations which totals $70307744 in 2017 and $51295220 in 2016 in case the subsidiaries which are a party to the deed gets wound up.

Balance sheet.

The balance sheet records the company’s Statements of assets and liabilities and the equity amounts by the end of the financial year. The statement details the balance of income and over a preceding period of the fiscal year. The current assets record an increase in 2017, which is an indication of an increase in company operations. However, the business needs to strive in maintaining low levels of the current assets just enough to meet the short term obligations. The increase ties up the working capital, thereby preventing the movement of cash in Fleetwood. The non-current assets also record an increase and decrease in some of the sectors. The goodwill reduced since some of the assets that were making the business incur losses were disposed of. The same situation is reflected in the property, plant, and equipment. The business disposed of part of the portfolio then acquired a new investment which it projects should be performing better. The presence if the differed tax was due to the business nonperformance, thereby making it difficult to pay taxes for the year. The business in the financial year 2016/2017 tried to maintain the current liabilities at a minimum level to improve on the company’s liquidity. The situation is good for the going concern of Fleetwood since more debt increases the interest payments, which is an outflow of cash to the company. The losses, however, affects the company’s level of equity. The business, however, did an excellent job in reducing the negative performance to a manageable level in 2017.
















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