Cumberland Worldwide Corp. (A) Case Study Analysis
Cumberland is a multinational company which generated a revenue of around $300 billion. It was a mining village built by Robert Dunsmuir in 1888. It was a coal mining community from 1888 to 1946. The company was very successful, until the management changed, after which numerous strategies applied by the company had failed. And,what added much to the company’s failure was anexcessive debt to finance procurements, which caused massive loss incurrences to the company. The administration was inefficient and the overheads were higher;therefore, the company was struggling to decrease its debt and rearrange its operations. (W.Moore, 1993)
The management and the Board of directors were new in the company. It was very challenging for them to transform the operations and implement the new decisions from the scratch.They decided to sell the company, but preferred shareholders voted against this decision, which was why the company sell was never initiated, and now the company has lost the value even more. The company has been facing consequences, such as: loss incurrence, an increased employees’ turnover, internal management problems, low operations and delay in investments.
The company figured out two alternatives to improve its financial performance and liquidity. The first one is cutting off debt through divestitures, liquidations and reduction of overheads,and the second is reorganizing the operations about Cross River products. Therefore, this case revolves round the concept of GAAP, which is debit restructuring. Debit restructuring entirely focuses on improving the cash flows so that company would be able to reduce liabilities in a timely manner, and reduce its debts by renegotiating with the lenders.
When a company faces financial problems that are disastrous; the Act determines as follows: 129. Company resolution to start measures to prevent business; (1) the board of directors may save the company by choice and start business proceedings for rescuing, and keep the company under supervision; if the board has reasonable grounds to believe that…………………..
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