Week 5 Discussion
The presentation of the performance of the Retailing Davion of Argon by the senior management indicates that the company is doing well in managing the cash inflow and outflow. The memo illustrates the short-term performance of the company. From the summary presentations, the value of accounts receivable is sufficient enough to improve the cash flow. The amount recorded shows the proportion of the outstanding invoices in which, when paid in time, the company grows its cashflow. However, such amount poses a risk to the company as the clients’ failure to pay the outstanding amounts within the stipulated time can fix the company in a financial crisis. It would be imperative for the Davion management to put some cautionary measures on the amount of credit they give to their customers.
The memo further describes the company inventory; however, the value recorded in the cashflow is alarming as too much of purchased inventory can result in cash flow problems in the company. There is an increased purchase of stock in which it demands the utilization of too much cash. Increased outflow may harm the Davion of Argon company’s cashflow. The Decision should, therefore, embark on minimization of the purchase on the inventory as such a move would have a positive impact on the cash balance.
The amount recorded as depreciation is vital to the business, although it does not have any significant impact on the cash flow. Davion company cannot overlook the effect of the depreciation value as it has some indirect effects on the cash flow. The amount positively impacts the cash flow of the business as it is categorized as an item of tax liabilities during the computation of taxable income. This consideration is beneficial to the company as there is a minimization of cash outflow that would have incurred from the income tax.
In Conclusion, the company is doing well in the management of the cash flow; however, some aspects concerning account receivables and purchases of inventory need to be monitored to improve the cash flow of the business.