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Report on The Improvement Project of Science Construction PLC

Introduction

In this report we will discuss ‘The Improvement Project of Science Construction PLC’ case study. Science Construction PLC provides services for constructing freeways, bridges, tunnels and train lines architecture, project creation, infrastructure procurement, project finance and leasing. The company’s most relevant clients are Istanbul, Ankara, Ismir, Bursa, and Kocaeli Municipal Authorities, as well as the Highways General Directorate. The company markets asphalt to those clients and, under their control, paves the highways.
The company’s asphalt production capacity is 520,000 tons per annum. Its main office is in Istanbul. There are 5 active development locations in 3 different cities of the company.
The primary cause for the bankruptcy of the Science Construction PLC is the continuing financial crisis that began in 2008. Domestic consumption shrank significantly during the financial crisis, the likelihood of accessing financial capital was minimal, and the cost of credit and loan guarantees soared. As a consequence, the organization was having trouble sustaining its productivity and holding the liquidity. Due to insufficient funding, public expenditures and the spending of the regional authority were also reduced. The consequences of the recession were severe, as a organization whose customer base was mainly in the government sector.

Description

The Turkish Execution and Bankruptcy Code require indebted businesses to appeal to a commercial court and to propose a scheme to restructure their obligations and to improve their financial condition. If the court specialist considers the scheme urgent and practical, the insolvency is delayed for one year.This delay is extremely significant for insolvent firms because the adjournment of the action stops termination proceedings from being started or reinstates the pending execution proceedings before the conclusion of the postponement phase. Ultimately, the program plays a critical role in helping bankrupt businesses to resume their activities and recover from the bankruptcy.
The organization faced trouble receiving its payables in a timely manner from the metropolitan authorities. Upon billing, the payables will only be obtained within seven to nine months. This lag meant that extra financial capital had to clear short-term debts. Extra financial assets were generated either by offering the payables to factoring firms, undervaluing development bills, or taking out business loans. The spending plan of selling payables was 15%, 13% for discounting progress bills and 11 to 16% for bank loans.If payment dates are extended when purchasing products and supplies, the rates may increase to prolong cash flow. The productivity is then decreased and the long-term cash flow is impaired. Selling asphalt to local governments forms the biggest share of sales. The bids are issued in February and March, and development runs from May to November. The cost gap between the date of contract obtaining and the date of production is expressed in the advance payments at the stage of the inflation figures of the supplier as per the Public Procurement Act.
High quick-term borrowing accrued over the years and rising interest rates placed tremendous pressure on the company to reduce its decision-making ability. The industry is set to exchange short-term debt with capital to address the unstable economic state.
Although incomes are rising, over the last 3 phases, operating profit and net earnings have worsened. The major reason is that the cost increases of the services sold were more than the increase in profits. Service prices have been rising as the value of the raw resources has increased. Company must take concrete steps to cut expenses and keep the business going.

Conclusion

There are some strong action must be taken by the Science Construction PLC to increase its cash flow. Company need to increase its capital by making the investment. But it need to done in a planned way and should be paid in different periods. Company needs to collect its due payables from its shareholders to increase its liquidity. For further increase its revenue it needs to do the cost cutting.
It is noted that it can save up to 3.00 TRY per unit costof the crushed stone if the company uses its own transports.
Company should increase its revenue by cutting its direct labour.The labor force should be organized in the coming duration as per the number and significance of deals secured by the firm. For the time span, employees who do not work due to underproduction should be granted unpaid leave of absence. Thus wages and subsidiary costs (e.g. food) will fall.To minimize the servicing, insurance, and cost of fuel, the number of vehicles used by the administrators should be reduced. The purchase of consumer goods should be organized and the company’s credit cards should be retrieved in order to have an efficient price transparency.

References

Committee, T. B. C. C. A. (2015, August 11). Effective Problem Solving and Decision Making. Retrieved from https://opentextbc.ca/workinginfoodserviceindustry/chapter/effective-problem-solving-and-decision-making/

Ryan. (2018, May 2). Insolvency In Construction: In Contract With An Insolvent Company – What Now? – Insolvency/Bankruptcy/Re-structuring – UK. Retrieved from https://www.mondaq.com/uk/insolvencybankruptcy/697586/insolvency-in-construction-in-contract-with-an-insolvent-company–what-now

Brick, M. (2001, May 15). A Leading Construction Company Files for Chapter 11. Retrieved from https://www.nytimes.com/2001/05/15/business/a-leading-construction-company-files-for-chapter-11.html

Bankruptcy and Construction Contracts – What To Do … (n.d.). Retrieved from https://www.stimmel-law.com/en/articles/bankruptcy-and-construction-contracts-what-do

Effects of Bankruptcy on a Construction Project … (n.d.). Retrieved from http://fwhtlaw.com/briefing-papers/effects-bankruptcy-construction-project/