Professional Documents
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The Weaknesses of The Companies
The Weaknesses of The Companies
The Weaknesses of The Companies
i. Liquidity problem:
Yes Drink’s current assets are highly comprised of huge amount of inventories which
need some time to be converted into cash. Thus, company is facing liquidity problem
to settle the current obligation with the current assets because the company has
RM0.59 liquid assets to pay its RM1 short-term liabilities. This ratio also lowers as
compared to the other competitors in the same industry which have enough liquid
assets (RM2.00) to pay current obligation.
Yes Drink Bhd also is facing efficiency problem in handling the stock. This indicates
that the company replaced it stock 1.5 times per annum as compared to its
competitors who replaced their stocks 3 times per annum. This low inventory
turnover indicates that low demand for the goods or company was making poor
sales. This could be due to poor marketing strategy implemented by the company to
promote their products.
In addition, Yes Drink Bhd also is facing efficiency problem in collecting their debts
from customers. The company needs 36 days to collect money from customers
which is considered late as its competitors requires only 15 days to collect their
debts. This indicates that company does not properly monitor its debtor aging
schedule or the company has loose credit policy.
Yes Drink Bhd also is facing profitability problem. The company gets RM0.07 net
profit for every RM1 sales made. This extremely lower as compared to other
competitors which managed to get 15% net profits for every RM1 sales made. This
could be due to operating expenses is too high .