Analysis of RadioShack Essay Example | Topics and Well Written Essays - 500 words

Analysis of RadioShack - Essay Example The company is suffering from net cash outflow instead of net cash inflow and this threatens to deplete its cash and cash equivalent reserve. This means that the company may be bankrupt in the near future and creditors are likely to lose their stake in the company. The company is also not doing well in its profitability because this source of cash inflow could offset the deficit in cash and cash equivalents that the company suffers (Carrasco 1). Possible stiff competition and poor operational management could be the reasons the organization is not doing well. While a large percentage of the organization’s stores are based in the United States, these stores have not been profitable to generate sufficient cash and facilitate growth. Competition could have also constrained demand, leading to high levels of inventory, and reduced profitability. Assuming the role of competition in the organization’s performance, poor operational strategies that have failed to minimize cost would be another reason for the current condition. The inefficient growth strategy is another reason for the condition because while the company is realizing challenges in its United States’ market while other markets remain promising, it has failed to shift its focus to the other regions (Carrasco 1). The economic approach to â€Å"profit maximization and marginalism† are the central principles to the problem that the company faces (Nicholson and Snyder 374). Under the profit maximization principle and within the scope of a competitive market, the company should operate at a level where the difference from its marginal costs to its marginal revenue approaches zero from the positive side (Mankiw 283, 284). This could inform production level and reduce or mitigate the realized negative cash flow, and develop creditors’ confidence and finance management’s efficiency.  Ã‚