Analysis of the Operation and Financial Condition of the Enterprise

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Analysis of the Operation and Financial Condition of the Enterprisepenalty on violation of the payment terms having accrued as of the date ofissuing the claim.7) If the debt is not paid for also during this period of time, any documents of thecase are passed over to a lawyer who is preparing to file the case with the court.Enterprise N has not until now used the option of offering its customers anydiscounts on early payment of their invoices. Therefore this could be one of the proposalsfor improving their management of accounts receivable, although the enterprise is not in aposition to offer high discounts, due to which it is unlikely that the building contractorswould pick up this option also taking into account that they are short of current assetsthemselves.It is advisable for the improvement of management of accounts receivable to applybefore completion of a project to any agencies operating in the business of trade creditreferences and to ask for a statement on creditworthiness and credit reliability of thetransaction partners by reducing the risk of the amounts of bad debts going up.5.5.4. StockUsually the management of stock plays a great role in large production companies,because stock management is key in ensuring the fulfilment of the programmes, reductionof the prime costs, raising of profit and profitability. Therefore, a timely provision of rawmaterials and component parts for the needs of the enterprise is highly important.According to the data of Table 5.24 ‘Stock and percentage of stock from total currentassets of Enterprise N in the period from 03/12/2XX8 to 31/12/2XX9’ it can be seen thatthe percentage of stock from total current assets is insignificant, the same as their changes.Table 5.24.Stock and percentage of stock from total current assets of Enterprise N in theperiod from 03/12/2XX8 to 31/12/2XX9March2XX8June,2XX8Sept.,2XX8Dec.,2XX8March, 2XX9June,2XX9Sept.,2XX9Dec.,2XX9Stock 347 1491 653 1036 666 3057 4416 1005Changes in stock byperiod 144 1144 -838 383 -370 2391 1359 -3411Total current assets 210557 241778 343779 318301 476754 386462 296149 304415Percentage of stockfrom total currentassets 0,2 0,6 0,2 0,3 0,1 0,8 1,5 0,3By looking at Table 5.24 it can be seen that the highest percentage of stock fromcurrent assets is 1.5% from the total current assets, while the lowest is 0.1% from the totalcurrent assets. This is, because the enterprise had been purchasing materials that weredirectly delivered to the location of realisation or the construction site and only thosematerials that are no longer necessary after the completion of the project are building-up inthe warehouse. Therefore any materials purchased are presented not under the current assetitem ‘stock’, but under the item ‘work in progress’. The project commences with thedesign and the technical specification of the project sent by the building contactor, inwhich all the materials required for the project implementation are stated. Next the projectimplementation estimate is being established, in which the reference prices for materials116
Analysis of the Operation and Financial Condition of the Enterpriselike tin pipes, insulation materials are searched in the directories and any discount isdeducted from the reference price specified in the directory offered by the supplier of thosematerials. In cases of more specific equipment provided for in the project and having nostandard offers in the directories, the suppliers of these items of equipment are being sent arequest to give the price quotation for a specific item of goods. The price offered isincluded in the project estimate. When the estimate of all costs involved in the execution ofthe project is approved on behalf of the building contractor, the project supervisor onceagain checks the offers of the prices and prepares the required budget for the realisation ofthe project within the limits of which the project will be implemented. In the course ofproject execution standard materials are purchased from the suppliers of materials withwhich the respective contracts are signed on sales of materials with the specific discountsby mentioning also the terms of payment in the contracts. The specific materials, on theirturn, are being purchased based on the price offer given by the suppliers of those materials.When in the course of project execution the respective materials are needed theconstruction supervisor prepares the list of materials required, which is then passed over tothe supplies manager of the enterprise, who takes care of delivering them directly to thesite and on time. It can be said that the enterprise is using the 'just-in-time' concept forprovision of the materials and therefore no large stock of materials is building up in thewarehouse.5.5.5. Cash resourcesCash assets have the highest degree of mobility among all current assets. 5.25. Itcan be noticed in Table 5.25 ‘Cash assets and their percentage from total current assets inthe period from 03/12/2XX8 to 31/12/2XX9’ that the amount of cash assets is varying,because the amount of cash available depends on when the debtors have paid their debts. Ifit is the same day or one day before the end of the financial period, this amount of moneyhas not been probably transferred to the creditors yet.Table5.25.Cash assets and their percentage from total current assets of Enterprise N inthe period from 03/12/2XX8 to 31/12/2XX9March,2XX8June,2XX8Sept.,2XX8Dec.,2XX8March,2XX9June,2XX9Sept.,2XX9Dec.,2XX9Cash resources 8947 12931 10014 3385 572 2581 1262 8916Changes in cashassets by period -14911 3984 -2917 -6629 -2813 2009 -1319 7654Current assets 210557 241778 343779 318301 476754 386462 296149 304415Percentage of cashassets from totalcurrent assets 4,2 5,3 2,9 1,1 0,1 0,7 0,4 2,9It can be concluded from Table 5.25 that the amount of cash assets at the disposalof the enterprise decreased considerably during the period from the end of December,117
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