CASE STUDY – CHICKEN RUN
MAF680
INDIVIDUAL WRITE-UP (5%): 1 HOUR
CASE STUDY 1 – CHICKEN RUN
ANSWER ALL QUESTIONS
QUESTION 1 (20 marks)
Based on the case Chicken Run, Ms Choy has discovered that the credit limit of Cold Gold Sdn Bhd, one of its major customers had gone into its level and yet the marketing department continued to supply products to the company.
Discuss two (2) possible implications of this issue.
Answer:
The implications if a major customers had gone into is level, it will affect the company cash flow because every payment received the company may have to use it to cover its operating expenses apart from getting profit. Accumulated debtors will show the collection department performance. Low cash flow will affect many areas in an organization. The company may have to make another loan to run it business. Other than that it may have problem to run the business if the cash flow is low. For example, if the company unable to pay the suppliers on time. The supplier may stop to supply product to the company. If the suppliers really stop supplying product, the company may face problem to produce product. This will directly affect the company sales because its fail to produce product to its customers. If the company do not work hard to reduce this important area they may be looking at legal remedies, or even write off debts and that means spending money to get money.
The other implication is that, the company will have a very unhealthy debtor’s aging. Where it is supposed to be a guidelines to the company. For example when a debtor reach it limit, the company should be alerted to chase payment based on the debtors aging. But in this case, Encik Selamat has been giving authority to the marketing department to continue supply products to Cold Gold Sdn Bhd because of the closed relationship. Indirectly, it shows that Encik Selamat does not performing his duty rationally. Which effect his image as a manager. He is supposed to show his leadership by having a very
INDIVIDUAL WRITE-UP (5%): 1 HOUR
CASE STUDY 1 – CHICKEN RUN
ANSWER ALL QUESTIONS
QUESTION 1 (20 marks)
Based on the case Chicken Run, Ms Choy has discovered that the credit limit of Cold Gold Sdn Bhd, one of its major customers had gone into its level and yet the marketing department continued to supply products to the company.
Discuss two (2) possible implications of this issue.
Answer:
The implications if a major customers had gone into is level, it will affect the company cash flow because every payment received the company may have to use it to cover its operating expenses apart from getting profit. Accumulated debtors will show the collection department performance. Low cash flow will affect many areas in an organization. The company may have to make another loan to run it business. Other than that it may have problem to run the business if the cash flow is low. For example, if the company unable to pay the suppliers on time. The supplier may stop to supply product to the company. If the suppliers really stop supplying product, the company may face problem to produce product. This will directly affect the company sales because its fail to produce product to its customers. If the company do not work hard to reduce this important area they may be looking at legal remedies, or even write off debts and that means spending money to get money.
The other implication is that, the company will have a very unhealthy debtor’s aging. Where it is supposed to be a guidelines to the company. For example when a debtor reach it limit, the company should be alerted to chase payment based on the debtors aging. But in this case, Encik Selamat has been giving authority to the marketing department to continue supply products to Cold Gold Sdn Bhd because of the closed relationship. Indirectly, it shows that Encik Selamat does not performing his duty rationally. Which effect his image as a manager. He is supposed to show his leadership by having a very