Blenheim Instruments Ltd and its Stakeholders

Question: Discuss about the Blenheim Instruments Ltd and its Stakeholders. Answer: Introduction: Jenny Pike, assistant account for Blenheim Instruments Ltd, along-with the accountant of the business, Russell Bayer, during the finalization process of the balance sheet for Blenheim Instruments Ltd as on 30th June 2015 came across a situation with regard to measurement and recognition of accounts receivable and its associated doubtful debts allowance for two of the largest customers of Blenheim Instruments Ltd where she observed that the two largest customers are facing financial hardship and had gone into liquidation process due to which Blenheim Instruments Ltd would not be able to recover no more than 10% of the debts owed to them. Blenheim Instruments Ltd also had in its financial books a large loan taken from ABB Bank. As per loan covenants based on loan agreement Blenheim Instruments Ltd is required to maintain its current ratio (current assets less inventories over current liabilities) of at least 1.25:1 and if Blenheim Instruments Ltd recognizes the effect of above mentioned accounts receivables of two largest customers it will not be able to meet its minimum required current ratio as per the loan covenants mentioned above. Jenny Pike decides to take up the matter with Russell Bayer but to her discomfort was informed to avoid recognizing the bad accounts receivable and leave the situation as it is till next year and by that time they will be able to estimate the impact on accounts receivable with certainty and manage to maintain its required current ratio as per loan agreement as on 30th June 2015. Who all are the stakeholders involved in the situation? Stakeholders Stakeholders are referred to those who have or may have any type of interest in an organization (company). It also includes those who are affected or may be affected by or have or may have an effect on an organization (company) (Kenny 2014). Stakeholders can be an individual, a group of individuals or an organization (bbc.co.uk). The below diagram depicts the various stakeholders a company may have: Stakeholders - Blenheim Instruments Ltd In the given case, there are number of stakeholders which can be identified in the given situation: Owners: The main stakeholders involved in the present case and situation are the owners of the Blenheim Instruments Ltd. The have a significant interest in the given situation as they will be the first victim of any loan covenants being not fulfilled by the company. Owners generally provide personal guarantees to the bank for raising any kind of loan facility to finance their business and in the event of non-fulfillment of any obligation by the company in respect of the loan; owners are the first party being affected badly. Management: Management of Blenheim Instruments Ltd, represented by Russell Bayer, is another stakeholder in the given case and situation. It is the responsibility of the management of a company to undertake day to day running operations of the company and also honor expectations and requirements of various other stakeholders like owners, employees, customers, lenders, suppliers etc. Employees: Employees of Blenheim Instruments Ltd, represented by Jenny Pike, is another stakeholder in the given case and situation. Employees forms part of one of major stakeholders of the company as they are directly impacted by any decision in favor or not in favor of the business of the company. The bread and butter for employees depends upon the successful running operations of the company and thus they are very much interested to keep the company in good health and shape. Customers: Customers are also one of the most important stakeholders a company has. In the given case customers are represented by two large accounts receivables. Customers provide the much needed sales, profits and cash to the company and the success of the company depends on how successful the company is able to manage its customers. Lenders: Lenders of Blenheim Instruments Ltd, represented by ABB Bank, is another stakeholder in the given case and situation. ABB Bank has lend loan amount to the company and have laid down certain loan covenants Blenheim Instruments Ltd need to adhere to. References Bbc.co.uk, Stakeholders, viewed on 01 September 2016, retrieved from https://www.bbc.co.uk/schools/gcsebitesize/business/environment/stakeholders1.shtml. ctb.ku.edu, Identifying and Analyzing Stakeholders and Their Interests, viewed on 01 September 2016, retrieved from https://ctb.ku.edu/en/table-of-contents/participation/encouraging-involvement/identify-stakeholders/main. Kenny, G. (2014), Five Questions to Identify Key Stakeholders, Harvard Business Review, viewed on 01 September 2016, retrieved from https://hbr.org/2014/03/five-questions-to-identify-key-stakeholders.