代写causes and consequences of Vocation Ltd failure
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代写causes and consequences of Vocation Ltd failure
1.Identity the problem:
This paper is an analysis of the causes and consequences of Vocation Ltd failure, and will outlining how the application of the third edition of ASX Corporate Governance Principles to help in avoiding that failure. Furthermore, it will apply agency theory when making arguments.
The failure of a business organization is dependent upon a number of factors include inside and outside factors. For example, recession, the change of interest rate, organizational mismanagement as well as “dysfunctional culture” can influencing the effectiveness of the company’s business operations (Rankin et al, 2012, page. 366). In addition, according to ASX CGC (2007), the phrase “corporate governance” describes “the framework of rules, relationships, systems and processes within and by which authority is exercised and controlled within corporations. It encompasses the mechanisms by which companies, and those in control, are held to account”.
2. Determine relevant information:
Vocation Ltd is an ASX-listed company specialized in providing training services. Over time, the company has been doing great until recently Vocation Ltd started to backslide. Reports indicated before its failure, the company’s stock was issued at $1.89.
A few months later the company Vocation Ltd made headlines over almost $20 million loss because of the quality concerns (ABC News, 2015). Reports pointed out that Vocation Ltd was faced issues related to the inability to meet its legal obligations to disclose accurate and timely information to the market. In fact, the company failed to disclose information which could significantlyaffecting the share price of its stock. After the information was leaked, its share price decreased up to 57% of its normal price in a single day (ABC News, 2015).
Within few days as its shares plunged by more than sixty percent, reports indicated at least $ 350 million of the company’s value has been wiped off.It was also argued that Vocation Ltd was aware of the concerns and regulatory in relation to its subsidiaries at the listing time. So it fails to adequately disclose those matters. It means that investors pay inflated price (ABC News, 2015). Just like any other listed firms in Australian, Vocation Ltd was affected and faced with the common challenge related to poor strategic management, inadequate cash flow and increasing trading losses as well as the poor economic conditions (Sansom, 2016).
3. Enumerate options:
3.1 Analysis of the causes of failure of the Vocation Ltd
3.1.1 Poor strategic management
In their recent report, the ASX stressed that the relationship between a poor strategic management and business failure is significant (Wilson and Woodburn, 2014). This is due to the fact that businesses that have implemented an adequate control and strong strategic management revealed to be more successful than companies that did not implement a strong strategic management in their business operations (Sansom, 2016).
Furthermore, the role that leadership and control systems play in producing results is significant. In their day-to-day activities managers rely upon data provided by control systems to make strategic decisions (Bromiley, Navarro and Sottile, 2008). However, it is said that accountability methods constitute the vital approaches to the effective management. Moreover, the lack of a strategic management system within Vocation Ltd led to the inability to control and manage operations. Because all the operations and activities conducted by Vocation Ltd should follow a detailed plan as managers encourage and motivate employees to comply with the strategic plan of the Vocation Ltd (Bromiley, Navarro and Sottile, 2008).
3.1.2 Inadequate cash flows and increasing trading losses
The provision of ASX emphasizes on good management practices and the focus on ethics in financial reporting. Considering the role of adequate cash flow in business, a big number of Listed Australian firms are faced with challenges related to inadequate cash flow. Cash flow problems affect all aspects of the supply chain of a company (D'Espallier, Vandemaele and Peeters, 2008).Cash flow problems in Vocation Ltd in form of losses are indications that this company did not take its financial statements with a lot of seriousness. As a result, firms that fail to look at their financial statements accurately are always faced with big problems that are costly. However, it should be noted that cash flow problems mean that a company is not making profits. This is due to the fact that even a company that is making profits can have a negative cash flow due to a number of reasons (D'Espallier, Vandemaele and Peeters, 2008). Such reasons include the lag time shipping out products among others.
Therefore, cash flow problems may cause poor cash management,so Vocation Ltd are out of business. It is, in fact, logical that a company without cash on hand cannot be able to finance its operations or to invest in assets required for a good performance (D'Espallier, Vandemaele and Peeters, 2008).
3.1.3 The poor economic conditions led to the failure of Vocation Ltd
The economic conditions of the industry have a great impact on the performance and growth of Vocation Ltd. Furthermore, some of the factors indicating the poor economic conditions of Vocation Ltd should include the low level of spending and high debt levels. Over the past few years, there have been many changes in the economy such as the economic recession. The issues relating to the change in the way business activities are carried out as well as the consumer price index and decrease in household income (Cotsomitis and Kwan, 2006).
4.Assess and make preliminary decisions:
4.1 The natureof the ASX Corporate Governance and their abilities
The corporate governance council has a set of accepted corporate governance principles.The principles are intended to the Australian corporate governance practices in Australian business firms. These principles are important as they are enable jurisdictions to adopt new legislation regulating corporate governance code. ASX council brings together different business, industry groups and shareholders in order to share views, expertise and insights on governance issues from the perspective of their industry and stakeholders (Corporate Governance Council, 2014).
The provision of Corporate governance principles and recommendations emphasize that the corporate governance practices that listed firm decides to adopt is depend upon the board of directors of that as it is responsible for the good governance of the organization ( Corporate Governance Council, 2014). The ASX Corporate Governance provide the company with an appropriate framework to address financial reporting issues (Janjani, 2015).Vocation Ltd would address insolvency and other issues (Corporate Governance Council, 2014).
4.2. How the application of ASX corporate governance could help in avoiding that failure?
As far as the ASX corporategovernance principles is concerned, it encompasses areas such as “lay solid foundations”management of the organization, the rights of security holders,ethics and accountability as well as leadership and structure of the board of directors. In addition to that, the provision of these principles encompasses the integrity in financial reporting among others (AVCAL, 2016).
4.2.1Principle 1: Structure the board to add value
In order to address (make sure) the strategic management issues, the corporate governance principles suggest that listed companies including vocation Ltd should have a structured board of directors. The advantage of the board of directors of the company is it can oversee the implementation and effectiveness of the company’s business operations. In addition to that, the board of directors is in charge of defining the business objectives of and the long-term goals of the organization (Corporate Governance Council, 2014). However, the weakness of this principle is that cannot ensure the board can discharge its duties effectively.
4.2.2Principle 2: Lay solid foundations for management and oversight
Concerning the poor economic conditions of the retailers’ industry, the corporate governance principles suggest that the company’s management should rely on its management. The advantage of this principle can monitor managers to make strategic decisions hence identifying and developing strategic approaches that are appropriate to handle the economic situation. Therefore, to help firms overcome the external economic conditions that could affect their business operations (Corporate Governance Council, 2014). The weakness is the implementation of supervision cannot be ensuring.
The Agency theory is useful of understanding the relationships between the principals and agents. For the agent is a representative of the principal in a particular business transaction. The role of agents is to represent the principal’s interest without regarding the self-interest (Glinkowska & Kaczmarek, 2015). In governance of Vocation Ltd there have been problems related to conflict between the different interests of agents and principals. It is therefore logical that the effective application of agency theory would have helped to address the inefficiencies and financial losses (Glinkowska & Kaczmarek, 2015).
4.3 Principle 3: Recognize and manage risk.
Establish a sound risk management framework for Vocation Ltd is necessary.Some of the factors indicating the poor economic conditions of Vocation Ltd during economic recession. The advantage of this principle is can reduce the insolvency risk. For example, Vocation Ltd can establish a insolvency system to monitor the account receivable and payable in balance sheet, therefore, auditors can use these information to provide timely and unqualified opinion which can reduce the effect caused by economic change. The weakness is the authenticity of the information in the balance sheet which can be manipulated.
5. List reasons explicitly:
“Lay solid foundations”management of the organization is the main ASX Corporate Principle that can prevent failure of Vocation Ltd. A good internal control can ensure the validity of business decision made by board and managers. For example, Vocation Ltdcan provide the accountability system to monitor the performance of the board and managers, which can reduce the risk of they do poor business decision, in order to reduce inadequate cash flow and trading loss. Therefore, the application of this ASX Corporate Principle is best choice to prevent Vocation Ltd.’s failure.
6. Self-correct:
This paper covered the analysis of causes and consequences of the failure of Vocation Ltd(AVCAL, 2016). In light of the corporate governance principles, the main causes identified that led to the failure of Vocation Ltd include the inadequate strategic management, the cash flow problems performance as well as the poor economic conditions(D'Espallier, Vandemaele and Peeters, 2008).
However, there are some limitations in the analyses of this paper. Firstly, some resources in this paper may not take account into the rapidly change of business environment and all available information. Secondly, this paper didn’t consider the Stewardship theory when making arguments.
References:
ABC News,. (2015). Private training college Vocation faces class action. ABC News. Retrieved 29 September 2016, from:
http://www.abc.net.au/news/2015-08-20/private-training-college-vocation-faces-class-action/6711866
ASX Corporate Governance Council, (2014).Corporate Governance Principles and Recommendations. 3rd ed. [ebook] Available at:http://www.asx.com.au/documents/asx-compliance/cgc-principles-and-recommendations-3rd-edn.pdf
AVCAL, (2016).Causes and consequences of the collapse of listed retailers in Australia Submission 7.7th ed. [ebook] The Australian Private Equity and Venture Capital Association Limited. Available at: http://www.aph.gov.au/DocumentStore.ashx?id=9256e5f3-192e-402a-be01- 40ea9a7a1644&subId=411949 [Accessed 26 Sep. 2016].
Bromiley, P., Navarro, P. and Sottile, P. (2008). Strategic business cycle management and organizational performance: a great unexplored research stream. Strategic Organization, 6(2), pp.207-219.Available at:
http://soq.sagepub.com/content/6/2/207.full.pdf
Cotsomitis, J. and Kwan, A. (2006). Can Consumer Confidence Forecast Household Spending? Evidence from the European Commission Business and Consumer Surveys. SouthernEconomic Journal, 72(3), p.597.Available at:
http://www.jstor.org/stable/20111835
D'Espallier, B., Vandemaele, S. and Peeters, L. (2008).Investment-Cash Flow Sensitivities or Cash-Cash Flow Sensitivities?An Evaluative Framework for Measures of Financial Constraints.Journal of Business Finance & Accounting, 35(7-8), pp.943-968.Available at :
http://onlinelibrary.wiley.com/doi/10.1111/j.1468-5957.2008.02101.x/abstract[Accessed 26 Sep. 2016].
Janjani, R. (2015). Comparing US-GAAP and Iran-GAAP operating cash flows to predict future cash flows.Journal Of Financial Reporting And Accounting, 13(1), 39-65.
Sansom, M. (2016).Why Australian retailers like Dick Smith are imploding: senate report. Government News. Available at: http://www.governmentnews.com.au/2016/05/australian-retailers-like-dick-smith- imploding-senate-report/ [Accessed 26 Sep. 2016].
Wilson, K. and Woodburn, D. (2014). The impact of organisational context on the failure of key and strategic account management programmes. Jnl of Bus & Indus Marketing, 29(5),pp.353-363.
Glinkowska, B. & Kaczmarek, B. (2015). Classical and modern concepts of corporate governance (Stewardship Theory and Agency Theory). Management, 19(2). http://dx.doi.org/10.1515/manment-2015-0015
代写causes and consequences of Vocation Ltd failure
