In 2019, Almafraq Toys Manufacturing Company started making and selling new toys for kids. The new toy was a hit, and sales soon increased and exceeded the planned level of sales. Consequently, the company faced a problem with space, so the president of the company decided to lease more space to meet the increasing demand on the new toy. Moreover, the current machines failed because of overuse, which was reflected later in the quality of the product. 

 The working capital was weak to expand production and the payments from customers were always delayed after product shipment. The company became suffering from a lack of cash, which made the company think of ceasing its operations one year later. 

 The Chief Executive Officer (CEO) of the company started studying the current situation in order to determine the reasons and to suggest solutions. Therefore, he asked you (as a financial manager) to: 

 Evaluate the financial impact of customers not paying until receiving their orders. 

 What is the major mistake the company made in dealing with the new toy, is it too many orders, availability of cash, or capacity problem? 

Answer rating: 100% (QA)

As a financial manager I can evaluate the financial impact of customers not paying until receiving their orders Delayed payments from customers can have several negative effects on a companys financia... View the full answer