Lesson from Ezra Bankruptcy: Asset Rich, Cash Flow Poor

By now, some of you would have read Ezra’s filing for bankruptcy protection in the United States. Previously a billion dollar company, Ezra’s fall from grace was due to the fall in oil prices. Nevertheless here are a few things we can learn from it.

1) Cash/Cashflow is key

One reason for Ezra”s decision to file for bankruptcy was due to its inability to pay creditors. The reason was simple – Ezra’s assets was neither generating sufficient cash flow to meet its daily expenses nor did it have enough cash reserves. If one were to examine Era’s balance sheet over the years; despite a growing asset base, Ezra’s assets were generating paltry cash flow.

In the personal finance sphere, it highlights to us the importance of our assets (income from work or property rental income) to generate the necessary cash to service our cash expenses. This is because regardless of …

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Comments

  1. Fred says

    In a crises of industry, national or global level, values that were measured during good times are very different from crises time.

    EZRA’s assets were measured during FY 16 and stated therein has a time lapse of as much as more than a year ago. In crises, the degeneration of values can be very rapid.

    In the SARS crises, a friend tried to dispose his coins collections. Every shop trading in old coins refused to take in and their true value is that indicated on its surface of the coins.

    Fred

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