Comments on Cash Flow Information Revealed by Cash Flow Statements - Assignment Example

Net Profit of the firm is fair enough in both the years but due to mismanagement or lack of operational management Fab Footwear Limited reported lower profit in the year 2008 but in the year 2009 Fab Footwear Limited's management revised its strategy and redefines its role in the business which in the end generates revenues at the upside. No significant moment is observed in the payment of dividends to the stockholders. Inefficient and ineffective working capital management policies throughout the period from 2008 to 2009 and I assume that this policy will not continue in the future.

Fab Footwear Limited should adopt a strong strategy between trade debtors and trade creditors because, in the end, it makes an impression on the operating cycle of the firm.Fab Footwear Limited current ratio is slightly lower in the year 2009 as compared with the year 2008 and indicates a lower margin of safety with respect to meeting current obligations. Fab Footwear Limited current ratio will not allow them to take more debt as compared to previous years. The overall condition of the current ratio reveals the fact that the current ratio which is not stable and healthy as compared to the previous years Besley, Brigham, Scott, Eugene F. (2001).Fab Footwear Limited quick ratio is higher in the year 2008 as compared with the year 2009.

 The overall condition of the current ratio reveals the fact that the current ratio which is not stable and healthy as compared to the previous years Besley, Brigham, Scott, Eugene F. (2001).Fab Footwear Limited quick ratio is higher in the year 2008 as compared with the year 2009. The reason behind this decline is the improper working capital management which makes the quick ratio less attractive in the last two years. The overall signal of Fab Footwear Limited liquidity is not good and it sends a negative signal towards the debt holders and also on the debt market.

Moreover, this liquidity crunch problem creates a hurdle for the company in the near future.