Let's us get back to the story of Felda's bankruptcy.
Is Felda already unofficially bankrupt or is in the process of becoming bankrupt (some people like to use the term 'technically insolvent') which is a misnomer.You are either insolvent or you are not.There is no in between.If you suffer a temporary cash flow problem that doesn't yet construe an act of bankruptcy until such time you can't pay your creditors and legal action is instituted against you by your creditors to recover the debts.
The question here is. Has Felda committed an act of bankruptcy which simply means it was unable to pay its creditors?
One can easily detect whether a company is liquid or not and the simplest way is to look at the current assets over current liabilities.This ratio is concerned with the assessment of an organisation's ability to meet its short-term obligations.Even this does not reflect true liquidity.The truest test is the acid test of the 'liquid asset ratio', which is current assets less stock/inventories over current liabilities.The minimum ratio should be 1:1 liquid assets over current liabilities.Anything less means the company is in trouble and will have problem paying its creditors and a probable cash flow problem that can effect its overall operation.
Can one detect a company heading for bankruptcy a year or two before it happens?
In 1968 Edward I Altman, assistant professor of finance at New York University came up with a formula that can predict a company heading for bankruptcy as far back as two years before it happens.The formula is a bit too complicated for me to explain here. It uses balance sheet values to measure the financial health of a company using different formula for different type of company.His formulas have achieved over 75 percent accuracy and gained wide acceptance by auditors and management accountants.
Felda is a GLC and as such its financial statements should be an open book.In fact, all public and private limited companies' accounts are opened for public scrutiny and it should be more so with GLCs.These are companies considered own by the people which make it imperative that those managing them show transparency and accountability.
Why is Felda silent and secretive about where the missing portion of the cash reserve gone to?
Felda should be more forthcoming and should publish its latest audited accounts to satisfy public's abhorrence.Simply saying our assets has grown by so much is not good enough.
Dato Mohd Maslan in a press conference didn't show an air of confidence or knowledgeable in finance when he simply put forth the increment in total assets as a satisfactory answer.Total assets meant nothing to liquidity.A company can have huge asset backing yet still go bust.Reason? It doesn't have enough liquid assets to pay short term debts.
The question? Is Felda having liquidity problem that forced them to use the cash hoard to finance their day-to-day operation or the money was spent on other investments.If there were investments what are they? These are simple questions that someone in the higher management should answer not people like Mohd Maslan who is an UMNO politician.
Below is financial highlights of Felda operations.
Performance 2004-2008 (year ended December 31)
Felda has yet to produce its audited accounts for 2009.
The last few years Felda has embarked on diversification of it business.In 2007 it bough out Robert Kuok's interest in Perlis Plantation Bhd (PPB) at a total cost of RM1.5 billion which bought them PPB group's entire sugar asset in the country.
Felda Global was created to diversify both locally and overseas.It formed a JV in Indonesia to open palm oil plantation, hotel and restaurant in Mecca, oleochemical in US and foodstuffs in UAE.
There was no announcement whether it uses internal funding or bank borrowings to fund the venture overseas.
If they have nothing to hide, it's about time someone in Felda wake up and give plausible answers to those relevant questions and send its detractors to hell.
(Unperturbed by the threat of an expensive law suit, issued by Felda yesterday, Tan raised another poser over the group’s alleged RM500million investment in Massachusetts-based Twin Rivers Technology.
“Felda is in the oil palm business. Why is it investing in an American business in the first place?
“And what benefits does Twin Rivers Technologies bring to Felda?” he asked.)
Profoundly stupid question.Probably, never heard of diversity,diversification and diversified resources.
Palm oil will not be the golden crop forever.A time will come when it will end up like the others, tin and rubber.
Felda was right in diversifying into other type of businesses.A one product company is vulnerable when market goes a yoyo.
It is not what other business the company undertakes should be the question.It is whether there were frauds and abuses of fiduciary duties that should be of concern.
Wonder, how they made this guy a deputy minister?
Not sure whether this makes any sense but read it anyway.