Capital Deficit
1
There are two things that we need to evaluate carefully before we jump in to making decisions. First, the company has a capital deficit of P97.1million. A capital deficit means the amount by which the capital outflow exceeds the capital inflow in a given time period. When a company has a capital deficit, they lack this cash buffer. In some instances, the company may lack a capital buffer all together and instead be sustaining itself on loans or depending upon continued sales to stay afloat. If this is the case, the company could experience difficulty should the market take a turn for the worst. A number of occurrences can be at the root of a capital deficit. If the company is new and not yet as profitable as it hopes to be, it may operate under a capital deficit as it is still in the building process. Additionally, if a more established business has experienced a particularly bad year or quarter, it may temporarily be under a capital deficit as it has used all of its surplus capital to keep the business afloat during the hard times. Poor money management can also be the cause of a capital deficit. If a company over-orders in supplies or expands prematurely, it could put itself into a position of capital deficit. When operating under a capital deficit, a company runs the risk of not being able to sustain itself should it fail to make expected sales. A capital deficit also puts a company at risk of peril if one of the places in which it has invested its capital should experience difficulties. If, for example, the company has invested some money in a potentially risky investment and that investment fails, it could lack the capital to recover from this failure and, as a result, experience pronounced financial hardship. Secondly, it has a loan to DBP which is payable by P160.1 million including interest and charges. At the moment the PJI is being burden by paying this loan. There were also cash released by PJI, which benefited Benjamin Romualdez, directly or indirectly, of cash funds aggregating P23.7 million during the past regime. Furthermore, the former DBP Governors approved behest loans of U.S. $1,869,140 in 1976 to 1978, which were manifestly disadvantageous to DBP and caused damages to the government.
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Transcript of Capital Deficit
There are two things that we need to evaluate carefully before we jump in to making decisions. First, the company has a capital deficit of P97.1million. A capital deficit means the amount by which the capital outflow exceeds the capital inflow in a given time period. When a company has a capital deficit, they lack this cash buffer. In some instances, the company may lack a capital buffer all together and instead be sustaining itself on loans or depending upon continued sales to stay afloat. If this is the case, the company could experience difficulty should the market take a turn for the worst. A number of occurrences can be at the root of a capital deficit. If the company is new and not yet as profitable as it hopes to be, it may operate under a capital deficit as it is still in the building process. Additionally, if a more established business has experienced a particularly bad year or quarter, it may temporarily be under a capital deficit as it has used all of its surplus capital to keep the business afloat during the hard times. Poor money management can also be the cause of a capital deficit. If a company over-orders in supplies or expands prematurely, it could put itself into a position of capital deficit. When operating under a capital deficit, a company runs the risk of not being able to sustain itself should it fail to make expected sales. A capital deficit also puts a company at risk of peril if one of the places in which it has invested its capital should experience difficulties. If, for example, the company has invested some money in a potentially risky investment and that investment fails, it could lack the capital to recover from this failure and, as a result, experience pronounced financial hardship. Secondly, it has a loan to DBP which is payable by P160.1 million including interest and charges. At the moment the PJI is being burden by paying this loan. There were also cash released by PJI, which benefited Benjamin Romualdez, directly or indirectly, of cash funds aggregating P23.7 million during the past regime. Furthermore, the former DBP Governors approved behest loans of U.S. $1,869,140 in 1976 to 1978, which were manifestly disadvantageous to DBP and caused damages to the government.
