The Collapse Of Abc Learning Centers

1896 WordsApr 13, 20178 Pages
Question 1: After the collapse of ABC Learning Centers (ABC), many investors kept asking the same question: “Why were not we warned?” According to research, warning signs or red flags can be found through the careful reading and analysis of historical financial statements of the company. Financial statements always provide at least one warning portraying the deteriorating nature of the financial position of a company and its subsequent financial performance. Like in other companies, ABC provided warning signals through analyzing its annual reports such as the financial reports. One thing that is certainly clear from the financial analysis alone is that there were many warning signals just from analyzing the financial report alone. The…show more content…
There was no proof that ABC was involved in intentional cosmetic accounting. Furthermore, there were rumors from the financial press that the gross revenue figures of ABC were overstated by including developer rebates. There is no doubt that financial analysts could have used the overstated 2005 notes as an alert. Question 2: Running a business venture requires a continuous examination and evaluation of the daily running of the business. Financial ratios can be used to ensure the business maintains and continues in its profitability trend. They can be used to show the strengths and weaknesses of a particular business. Examining financial ratios for a particular period of time can be used to identify unusual changes thus alerting the management on the progress of the business venture. Financial ratios are also helpful in carrying out financial analysis and forecasting. They also allow the owner of the business and the entire management to come up with business specific goals that can easily be traced to determine the company’s progress towards achieving them. Financial ratio analysis refers to the process where financial ratios are calculated. Financial ratios are mathematical indicators that are calculated by the comparison of key financial information found in financial reports and statements, and analysing them to find out reasons why the business is at its current financial position, and how the business is performing financially; this
Open Document