Evaluating the financial condition of Eastman Kodak can be troublesome. Per my evaluation of their quarterly report which was found at http://www. kodak. com, some red flags have appeared that the auditors should be aware of. These stand out and should have special focus on. This quarterly report is based on the companies’ business activities as well as their subsidiary companies between the reporting periods of January 1, through December 31, 2011. It has been speculated that some of the previous reports have not been dealing on actual performance data basis (Avery, 2012).
While many believe this to be impossible and untrue, however, there seems to be that there were no exceptions reported or noticed on prior reports. Once again, while analyzing this report there seems to be correspondence in regards to data exclusion from the outsourced operations and data for leased facilities were indicated. The cash flow analysis of Kodak has always been cause for concern. The Kodak companies the past several years have had many issues as seem by the financial statements.
“The internal cash flows are negative indicating that this company has a financial problem (Arnold, 2012). Items such as the operating costs, investing, and the use of the cash and its outflow when it has cash are what we consider internal cash flows. Kodak company is aimed its focus on funding numerous functions and operations. This funding was to make sure that the IP licensing strategy would a hit. For this to be applicable, the company would have to sell its assets. “Thus in order to be successful in
the IP portfolio strategy EASTKOD 3 Eastman Kodak set there sites aimed at getting funds of over $200 million and then to have licensing transactions to generate between #250 and $350 million dollars (Anderson, 2012). Some of the red flags that they should be aware of can be economic factors, earning problems, excessive debt. With these factors in mind it is clearly visible that Kodak focused on clearing their work on the idea of sustainability that they had place in process within the 2011 fiscal year.
For Kodak to stay competitive they had to initiate new programs to generate business in the areas in which they operate. These programs would boost business. “After the 2011 quarterly report, Kodak was more sustainable and looked to prosper and take advantage of their customer’s economic, environmental, and social performance in order to maintain and attain a profitable , sustainable, and digital company (Anderson, 2011). With these red flags mentioned, Kodak and its position economically, either would attract or not attract investors.
This is due to the fact that the economic factors such as the earnings of an organization give an idea of what its profits, and the shareholders value to be. The public willingness to invest and to get companies to fall in line with them, Eastman Kodak is not an attractive company. This is true due to its low profits the company makes based on its last quarterly report. Kodaks last quarterly report and its last 3 previous years indicate that the company if financially falling.
During the audit procedure they should be alerted that Eastman Kodak has adjusted its financial statements making its return on capital and its economic stability unreliable. Eastman Kodaks free cash flow is well below par. Their strategy has failed, and this will not attract new investors. The financial statement show that the cash flow has reduced and this is partly contributed to the board and the lack there of on their fiduciary duties.