Question

Red Flag 4

The balance sheet shows that the checking account has over $15,000 in it, and the account does not pay interest. The shop does not have an interest bearing account.

• Calculate each red flag’s impact on either revenues or expenses
• Calculate each red flag’s impact on profitability
• Show a potential remedy or solution to address each red flag

Answer 1

Many checking accounts come with an array of fees that an account holder may incur. Fees include monthly or maintenance fees, ATM withdrawal fees from third-party machines, in-bank transactions fees and over-the-phone transaction fees for using customer service. Some banks also require minimum balances and charge a fee if the account balance is lower than the minimum. Other disadvantages of checking accounts include ATM withdrawal limitations, potential overdraft fees and debit card usage fees. The company has a checking account of 15000 which means there is no interest earned on that money. If that money is kept in a savings account it could have increased the company profitability. To solve this problem the company should optimally utilise the funds or kept it in saving account