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 …