Liquidity information : creation of a model which provides current and future liquidity information, while taking the effects of changes of variables into account

Hooijman, T.H.J. (2012) Liquidity information : creation of a model which provides current and future liquidity information, while taking the effects of changes of variables into account.

Abstract:Gold Coast Fruits (GCF) is a pineapple company located in Adeiso, Ghana. The company produces pineapples mainly for export to Europe. In the beginning of 2012 GCF came into liquidity problems, which were resolved by restructuring the outstanding debt. A main reason for running into liquidity problems was the absence of periodical information about the current and future performance. Currently a monthly performance overview is created, but this overview does not contain the desired liquidity information for the management. Also the current monthly performance overview lacks information on the future liquidity developments. Central matter of this thesis is to provide a model which provides the management of the desired liquidity information and takes the effects of changes in certain variables into account. The main research question is formulated below. “What information is required to have an overview about the current liquidity position and the liquidity developments, while taking the influences of relevant variables into account?” At first a literature study was conducted to form a theoretical framework for this thesis. The main subjects of the theoretical framework are cash flows, budgeting, standard costs & variance analysis and liquidity position. After the creation of the theoretical framework data was gathered. For the data gathering records of GCF were analyzed and several interviews with stakeholders were conducted. The first step in providing an overview about the current liquidity position and the liquidity developments was the analysis of the current cash flows. In this analysis all the cash flows were divided in three major categories; cash from operations, cash from investments and cash from financing. Later the cash flows were even further classified. After the classifications of the cash flows, budgets were setup to project the future cash flows. The budgets were setup by analyzing the old cash flow records and interviewing department managers. Some cash flows could be related to the activity level of the company and be variable budgeted. Other cash flows could not be related to the activity level and were fixed budgeted. After the formulation of the budgets, all the information was combined and incorporated in a model. This model contains all the different cash flows separately in tabs and combines the cash flows in the financial statements. Furthermore an interface was created to provide the user with a quick overview of the company’s performance and provide the user with the option to simulate some future scenarios by changing certain variables. Finally a maintenance manual is written to ensure a correct maintenance of the model. The created model meets the content requirements, which were derived from the discrepancy analysis between the desired and current situation. The created model provides a monthly performance overview; it contains information about the current liquidity information, the operating profitability and variance analyses. Furthermore it projects the developments of the liquidity and the operating profitability. Finally the model is able to simulate future scenarios, which provide the management with flexible information. Next to the content requirements the model also meets the formulated design requirements. The model presents the information in a clear way, it is easy maintainable and the simulation of the variables is easy. There is still room for improvement to the model. The most important recommendation for GCF is to improve the operational cash flow budgets. This can be done by standardizing the fuel-costing operations and the employee activities. Another recommendation is to keep records specified to cost centers, this enables the possibility for more specific variance analysis. The last recommendation is to improve the depreciation records, so the full income statement instead of the EBITDA can be incorporated in the model.
Item Type:Essay (Bachelor)
Gold Coast Fruits ltd., Adeiso, Ghana
Faculty:BMS: Behavioural, Management and Social Sciences
Subject:85 business administration, organizational science
Programme:Industrial Engineering and Management BSc (56994)
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