With to mitigate these risks, Danalyn should seek

With the departure of the non-executive financially literate director, importantly, Danalyn must implement immediate changes to its Board. Danalyn should seek to quickly bring in a CEO, with sound financial knowledge and experience. Danalyn should issue more shares to all directors of the Board, but these should be restricted stock options, ensuring payments when targets are met. These targets should not only be profit targets, but also targets surrounding cash flow. This prevents myopic profit seeking, and encourages the directors to think long-term. This will force the company to meet its present obligations and ensure sufficient cash to do so.A significant issue surrounding Danalyn is the lack of cash. This is well illustrated by its acid test ratio, which is decreasing, meaning less cash is available to meet current liabilities. This is clearly significant given the bank is insisting the overdraft be reduced. Hence, Danalyn should transfer profit reserves and place it into a general reserve account/ an account which pays interest. This means investor funds are locked into Danalyn and cannot be withdrawn; this is a sensible measure considering Danalyn has had constant increases in the return on equity. Following this, Danalyn should issue bonus shares. By issuing bonus shares, shareholders experience a wealth effect, ensuring confidence in the business and should further improve lender confidence, from banks- this is because restricting shareholders from taking out funds means greater financial security, allowing Danalyn to increase its cash held. This should make it more favourable in terms of its overdraft agreement, as well as interest payments.As Appendix A illustrates, the inventory turnover period has increased by approximately 300% from 2015 to 2017.  This is fundamentally because of two main reasons; firstly, a lack of demand in tough economic times means customers are less willing to purchase further goods, hence explaining why inventory is held longer before being sold. Secondly, overestimating demand leads to over-production of goods, which causes excess inventory for Danalyn. This can have negative implications for Danalyn, due to inventory obsolescence as well as reduced liquidity due to a greater operating working capital. In order to mitigate these risks, Danalyn should seek to actively manage inventory levels, for example by continuous monitoring of stock levels as well as centralising stock holding and clearance activities. This could also mean setting minimum quantity levels being sold per order; although this may exclude a large proportion of smaller business customers, this may be necessary in the short term to get rid of stock held. Customers may be offered a contractual agreement whereby purchasing quantities of goods above certain thresholds means additional quantities being offered at a discount rate. Although this reduces the profitability of the stock sold at a discount, there is a significant loss in business value through holding inventory, as a pose to selling or meeting new sports clothing trends.