Author: Marissa Lee
Date: 4 February 2017
Caption: Ezra is experiencing problems which leads them to reviewing their business operations and balance sheet.
This article talks about the loss Ezra is experiencing due to the oil sector downturn. Ezra is reviewing all its business operations and balance sheet as they consider writing down US$170 million. According to Investopedia, “write-down is the reducing of the book value of an asset because it is overvalued compared to the market value”. In Ezra’s case, necessary adjustments are necessary to their financial statements as it might lead to more further losses being made. Ezra already made about US$181.3 million loss relating to the joint venture last year.
This article can be linked to the second topic in the Module Document which is ‘working with financial statements’. Under this topic, there are two subtopics which are ratio analysis as well as using financial statement information. There are mentions of the company’s liquidity as well as financial statement information in this article.
In one of the sentence, they mentioned that “DBS Bank would be the “hardest hit” in the event that the Ezra group goes into liquidation. Liquidation means the process of bringing a business to an end and distributing its assets to claimants. This means that Ezra’s business is at the risk of liquidation which further shows the need for the company to write down their assets. The process of writing down is usually reflected at the company’s income statement. This usually reduces net income but it also reduces the firm’s tax burden and this might help Ezra in recovering their losses. Based on this article, it is possible to use Ezra’s financial statement information to know the plight of their business now. Seeing Ezra major losses since May, in the previous year, it is only right that they write-down their assets to further save their company from making more losses and incurring more debts.