Polar Sports Inc Case Study Help
Bank has a risk of liquidity associated with this increasing liability, as banksalways prefer investments where they receive their payments as soon as possible. Therefore, there is an overall increase in total liabilities under the production level as compared to the given data (see Exhibit 1). Projections show an increase in liabilities by 19% in January 2012, 27% in February 2012 and 35% in March, and this ratio is increasing with each passing month. This indicates to the significant risk associated with an increased liability for the parties, such as: banks and other lenders. (See Appendix 1)
5. What would be the impact of unsold inventory on cash flows and projected cash savings?
The inventory turnover in days is increasing from 38 to 41. The increase is minor but if it further increases, then it would affect the company’s performance negatively. Due to this, the company can face an increase in the cost of storage,but in the current scenario; it is negligible because the changes are just minor and won’t affect the company’s performance to a large extent. Moreover, there is a threat of inventory becoming obsolete in the market. (See Appendix 6)(unknown, 2018).
The overall effect of changing the methods can be constant only if the cash flows from operations, show a positive impact over the level product, which was negative in the seasonal manufacturing method. The cash flow from investing and from financing activities show consistency. The pattern is different in both of the methods. Even the cash at the end is also constant in level production as well as seasonal manufacturing method.(See Appendix 5)..........................
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