...Fly By NightFly By Night International was founded by Douglas C. Mather in the mid 1970's. He started the company as a pilot training school. Then he branched out into government contracting. He used his “rent-an-enemy” fleet to the Navy and Air Force for use in fighter-pilot training. The company experienced great success during the first five years of its operations and the stock price almost doubled. However, in year 14 the company started a rapid descent. The company did not have enough cash flow to service its debt. Furthermore, the company found material misstatements in their financial statements. After analyzing the financial statements of the company it has become clear the causes of the cash flow problems.
a. An important factor that indicates a company’s liquidity position is to analyze the change in current ratio and quick ratio over time. The liquidity position of the company declined significantly. Year 13 shows a huge decline in the liquidity.
Year Current Ratio Quick Ratio
Year 9 1.00 0.79
Year 10 0.40 0.35
Year 11 0.74 0.60
Year 12 0.94 0.65
Year 13 0.33 0.24
Year 14 0.15 0.09
Another important indicator is to compute the operating results of the company. An analysis of gross margin, operating margin, and net income margin will help summarize the company’s performance. Fly...
...Fly-By-Night International Group: Case Study
After reviewing Fly-By-Night International Group’s financial statements there was a lot of evidence that signaled the cash flow problems experienced in mid-year 14.
The first problem I encountered was the company’s accounts receivable had steadily increased, rising faster than sales from year nine through year 14. The inventories also increased during the same time period. When accounts receivable is rising faster than sales it indicates that Fly-By-Night was not aggressively collecting cash from its customers thus possibly indicating loose credit terms for customers. Also inventories were rising faster than sales. This indicated that the company was producing more products than were in demand. In both of these scenarios the cash is tied up where it cannot generate a return for the company.
Secondly, the company’s debt had steadily increased indicating that the company was taking on more debt than it could handle. This along with lower sales indicates the possibility of a cash flow problem. The company could have possibly managed this debt better by effectively managing its inventory not to produce more than was needed and also tightening the credit terms for customer so more cash could be generated within the company.
Another cause for concern is the company, while showing a positive net income for the three years prior to year...
TOPIC: Financial Statement Analysis
CHAPTER LINK: Chapter 5
Fly-By-Night International Group: Can This Company Be Saved?
Douglas C. Mather, Founder, Chairman, and Chief Executive of Fly-By-Night International Group (FBN), lived the fast-paced, risk-seeking life that he tried to inject into his Company. Flying the Company's Learjets, he logged 28 world speed records. Once he throttled a company plane to the top of Mount Everest in 3 1/2 minutes.
These activities seemed perfectly appropriate at the time. Mather was a Navy fighter pilot in Vietnam and then flew commercial airlines. In the mid 1970s, he started FBN as a pilot training school. With the defense buildup beginning in the early 1980s, Mather branched out into government contracting. He equipped the Company's Learjets with radar jammers and other sophisticated electronic devices to mimic enemy aircraft. He then contracted his "rent-an-enemy" fleet to the Navy and Air Force for use in fighter-pilot training. The Pentagon liked the idea and FBN's revenues grew to $55 million in the fiscal year ending April 30, Year 14. Its common stock, issued to the public in Year 9 at $8.50 a share, reached a high of $16.50 in mid-Year 13. Mather and FBN received glowing writeups in Business Week and Fortune.
In mid-Year 14, however, FBN began a rapid descent. Although still growing rapidly, its cash flow was inadequate to service its debt....
a. What evidence can you observe from analyzing the financial statements that might signal the cash flow problems experienced in mid-Year 14?
There are a few factors that attributed to the cash flow problem in year 14. First, one of the most important areas that shows how liquid of a position a company has is by analyzing the difference in the current ratio and quick ratio over a period of time. The current ratio is current assets divided by current liabilities and the quick ratio is current assets subtracted by inventory, divided by current liabilities. From the chart below we can see that there was significant drop off from Year 12 to Year 13. During Year 13 Management should have determined that there was a significant decline in liquidity and changes should have been made. [pic]The next factor that is important to analyze a company the operating results of the company. The most prevalent of these are operating margin and net income margin. Please see below for the trends of the three. Operating margin is computed by taking operating income and dividing it by revenue and net income margin is computed by taking net income and divide it by revenue. [pic]
From the chart we can see that there is a declining trend in both operating margin and net income margin in Year 13 and 14. Management should have determined that there were significant problems starting in year 13.
B) Can FBN avoid...
...The Fly by Katherine Mansfield
The story “Fly” throws light on the fact that time is a great healer and it conquers grief.
Mr. Woodifield comes to see his ex-boss. He is retired and is a heart patient. He praises the new setting and furniture of the office. Then the boss offers him whisky. After drinking it, Mr. Woodifield remembers what he has forgotten. He tells the boss that his daughters have visited the graves of the boss’s as well as Mr. Woodsfield’s son. Actually, they have died in a war.
When Mr. Woodifield has gone, the boss remembers his dead son. He tries to have the same feelings of grief as he felt on the day of his death. However, he fails. For the last try, he decides to go to the photograph of his son, but a fly in an inkpot attracts his attention. He forgets all about his son.
He takes the fly out of the inkpot and puts it on a blotting paper. As soon as the fly is about to fly, he drops a drop of ink on it and enjoys its struggle. At last, the fly dies of drops of ink. The boss throws it away and orders for a fresh blotting paper. Then he tries to remember what he was thinking before attending to the fly. It means he forgets his dead son again.
What is the theme of the story “Fly”?
This is a quite established fact that the story “The Fly” is about the conquest of time over grief.
No doubt, this is...
While reading “Night” by Elie Wiesel, I came across a lot of key ideas and themes that ran consistently through out the book. Three major ideas that I felt were important were Elie’s trial to keep faith in his God, the use of silence and night and finally, having to keep your mind at ease amongst all the inhumanity. Although these ideas are different, they play off of one another.
Elie’s biggest struggle is to maintain his belief and fate in God’s hands. Elie’s battle with his faith is a prevailing conflict in Night. At the beginning of the memoir, his faith in God is undeniable. When asked why he prays to God, he answers, “Why did I pray? . . . Why did I live? Why did I breathe?” His belief is unstoppable; compassionate God is content, and he cannot imagine living without faith in a higher being. But shortly into the memoir, this faith comes up against several hurdles as he tries to prove his faith to God. Eliezer’s faith started at a young age. While most teenaged boys were out playing in the streets, he was in the temple studying the Cabbala even if it was against his father’s wishes. Mosh the Beadle helped him to focus his studies in Jewish mysticism and come to the conclusion that God is everywhere in the world, that nothing exists without God. Elie has grown up believing that everything on Earth reflects God’s holiness and power and everything is influenced by his holiness. His faith is based...
... In Elie Wiesel’s memoir, Night, holocaust survivor Eliezer suffers from one of the most painful events in human history: the Jewish Holocaust. As a result of his suffering, he is radically changed from a devout Jew, to a devout cynic. His religious fervor is lost, and little hope is provided for its salvation.
The definition of holocaust is mass destruction; this is usually associated with the mass destruction of human life. Another definition, although horribly ironic, is a burnt offering. Perhaps ‘burnt offering’ is an accurate definition because this is exactly what happens to many Jews: they are thrown in a crematorium. Before Eliezer is violently shoved into the destruction, he lives a normal Jewish life in the town of Sighet. Like many, he has an interest in the religious aspect of his life. He states, “By day I studied the Talmud and by night I would run to the synagogue to weep over the destruction of the Temple” (3). He asks his father to find him a master that could guide him in the studies of Kabbalah. Kabbalah is a form of Jewish mysticism. His father does not help him find a master, and tells Eliezer that there are no Kabbalists in Sighet. But nevertheless, he succeeds in finding a master on his own, Moishe the Beadle. Moishe the Beadle is a poor man, yet an insightful person.
“Man comes closer to God through the questions he asks Him,” he liked to say. “Man asks and God replies. But we do not understand His replies. We cannot...