CASE 1
========
BANNER MANUFACTURING INC.
Mr. Banner has recently contacted your accounting professor to find
a replacement for his general manager and controller who was fired
recently. Due to your interest, intelligence and dedication, your
professor has recommended you.
In your first interview, Mr. Banner gave you a copy of the Banner
Company’s last year balance sheet (Appendix A) and income statement
(Appendix B) and asked your opinion about his company. Mr. Banner
was indeed very unhappy about the negative cash balance at the end
of the prior year. He mentioned that his company made a good amount
of income and also borrowed $1,000,000 from the bank. Why then
the Company had a negative cash balance ?
You promised Mr. Banner to review the financial statements more
closely and to find reasons for the negative cash balance and other
problems with the operations and the financial statements.
REQUIREMENTS
—————
Prepare a short report for Mr. Banner to explain the reasons for
the negative cash balance at the end of the previous year and other
operating problems. To support your points, you may use a statement
of cash flows and relevant financial ratios.