Question

A major retail outlet is facing shortages for its supplies, and is facing complaints from its customers. This was due to the company repeatedly delaying payments to their suppliers, resulting in quite a number of them refusing to give further orders until payments have been made. In the meantime, the retail company is facing cash flow problems.

Comment on the main issue in the above scenario and suggest some solutions to overcome it. Give 5 main issues.

Answer 1

The major problem associated is the cash and liquidity crunch in the company because the company is not able to have enough cash in hands in order to repay its short-term creditors so, creditors had disallowed the company of further credit.

Major problem associated is that lack of management of the cash conversion cycle of the company and it should have been managed properly in advance.

5 main issues in relation to cash flow problems are as follows-

A. Delay in payment to the suppliers of the company

B. Lack of fulfillment of the order to the customers

C. Lack of cash in hand and liquidity problems of the company

D. Lack of effective management of resources by the company due to which liquidity problem had risen up

E. Lack of proactive management of the company.