Apart from this, the gross profit amount as depicted in the income statement of the company is significant and can be regarded as highly favorable for the company. However, the operating expenses of the company are significantly high, which, as a result, have undermined the significance of the gross profit. The liquidity position of the company indicates that there are too much liquid assets held up by the company, which could have been invested for generating income from other sources (Webster, 2003; Nikolai, Bazley, & Jones, 2009).
The company’s operational efficiency can be questioned on the basis of the fact that there is only one employee who runs the manufacturing operations of the company. On the other hand, there is no marketing department of personnel of the company which would prove to be helpful in sales promotion of the company (Nikolai, Bazley, & Jones, 2009). Moreover, there is only one shareholder of the company, i.e., the owner herself. This unity of ownership means that all risks are for the owner to bear. Recommendations to the Owner of Creative Chips
On the basis of analysis presented in the above paragraphs, following are the recommendations given to the owner of Creative Chips:
Considering the cash flow statement of the company, one can see that there are no inflows of cash for the company from investing or financing activities. Thus, the only cash generating source for the company is its manufacturing and selling operations. On the basis of these observations, it is recommended that the company shall invest its retained earnings or lend its finance to others so as to make sure that there are other sources of income also for the business. ...