Case Analysis-Milton Manufacturing Company Study

Analysis-Milton Manufacturing Company - Case Study Example Issues at Milton Manufacturing Company Companies that face issues must identify them in order to evaluate its effects and to find solutions to resolve the problems. The managers of the company are directly responsible for the performance of the employees and the company as a whole. Resolving problems can help improve the productivity, efficiency, and profitability of a company. Milton Manufacturing Company faces three types of problems. The three types of problems present at the firm are accounting, operational, and ethical issues. The accounting department is responsible for recording, tracking, and monitoring the economic activity of a firm (McGuckin). It is of the utmost importance for accountants to comply with the generally accepted accounting principles (GAAP) and to maintain a high level of ethical conduct by the professionals that practice accounting. The first financial problem that the company faces is that its revenues decreased by 10% in comparison with the previous year. Lower sales results hurt the bottom line of the company by lowering its profitability. Another issue with lower sales is that it can deplete the cash reserves of a firm. A second accounting issue was that the capital expenditures of the company were increasing at a rate of 26%. A third accounting issue Milton Manufacturing Company faced was a reduction in its cash flow position. ... Lower sales results hurt the bottom line of the company by lowering its profitability. Another issue with lower sales is that it can deplete the cash reserves of a firm. A second accounting issue was that the capital expenditures of the company were increasing at a rate of 26%. A third accounting issue Milton Manufacturing Company faced was a reduction in its cash flow position. Cash is the most important assets a company holds because it is used to pay for the short and long term obligations of the company which include payments of payroll, utilities, and debt. The cash flow from operating activities of the company decreased from $1,925,000 to $1,722,000. The firm’s cash outflow from investing activities increased from $1,834,000 to $2,244,000. The only positive activity in the statement of cash flows is that cash from investing activities received an inflow of $168,000 instead of the outflow the firm had the previous year of $376,000. The cash position of the company was ext remely important due to the fact that the company was in the process of obtaining a $20 million loan from Second Bankers Hour & Trust Co. Ann Plokin determined that if the company keeps spending at its current pace it would not be able to pay for the $20 million loan. In order to remedy the situation she implemented a control measure to limit the capital expenditures of the different plants to the 2009 level of expenditures. Milton Manufacturing Company also faced production problems. One of its plant managers, Sammie Markowitz, identified a major operational deficiency in the machinery and equipment of the firm. He notified the problem to the VP of operations. The problem he identified was