Gotham Meals on Wheels Harvard Case Solution & Analysis

QUESTION 1

The balance sheet, income statement and the cash flow statement has been made. Refer to the spreadsheet.

QUESTION 2

There are some of the problems that are likely to exist or occur in the future. These are:

• The case states that inefficiencies exist in some offices due to which bills were sent one month late to the customers. The management seems to lack here or the internal controls of the company have not been properly formulated.
• Clients took 30 days at least, to pay for their outstanding bills. The management of the company did nothing to manage the receipts from these customers. The reason for this could be that the company was not aware of the consequences of receiving its payments late or the management overlooked this issue.
• The cash position of the company seems to be weak till April.

QUESTION 3

The advice that I would like to give to Mr. McCall in regard of the problems identified are:

• Mr. McCall should take steps to formulate strong internal controls so that internal administrative and supplier issues are dealt promptly. The bills should be sent to the suppliers on time so that the cash flow of the company is smoothened and the cash flow problem being faced by the company is resolved. This issue is the main factor behind the shortage of cash in the company as shown by the cash flow statement.
• The management should take steps to chase its customers. It should ask the customers to pay early. Bills should be sent to the customers immediately and a specific payment period should be set up. Discounts could also be offered to speed up the receipts.

The company should set up sound working capital management policies to control the shortage of cash in the company. The cash operating cycle of the company should be reduced and efforts should be made towards it...............................

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