Fly by Night

                                                Case: Fly by Night

Fly By Night

        Fly by Night International (FBN) is a company founded by Douglas C. Mathers, a Vietnam veteran who was a fight pilot in the Navy before flying commercial airlines. Mathers created Fly by Night in the 1970’s as a pilot training school. In 1980s, with defense build up starting to pick up, Mathers embedded radar jammers and other defense equipment into the company’s planes. Fly by Night became a rental enemy, contracting to the government from the Navy and the Air Force. Their fighter pilots would train toe to toe against the FBN rental enemy as a way to get them ready for mid air dogfights. With backing from the Pentagon, FBN’s revenues grew to $55 million in a fiscal year and had common tock issued to the public for $8.50 a share in year nine. By year 13 FBN’s shares nearly doubled reaching $16.50 per share. During their 14th year, FBN experienced a rapid decent and Mathers was asked to step aside as manager and director of the company due to the company’s financial statements having some misstatements which needed some investigation.

        During the investigation it was found that the company was experiencing rapid growth with significant increase in their cash flows from operations but we also see that there is an increase in accounts payable in such a manner that is unable to payback it’s stock holders. On top of that, on the FBN’s cash flows we see that investments increasing for equipment, property, plant, and property. The operational income, unable to pay for these investments, is financed by more loans.

        Keeping Fly by Night afloat in year fifteen, the board of directors would have to take control of it’s increased liabilities which in year ten was $33.28 million to $68.28 in year thirteen. Fly by Night made a similar mistake to the firearm’s manufacturer, Colt, by focusing on their government contract narrowing their market. If they opened their market up and pursued other forms of earning revenue. The board should also analysis, the growth rate of the company all while taking into account the money coming into pay for such growth. We see many instances where the company was growing too fast to cover its expenses. Taking into consideration the amount of money it can invest back into expanding rather than investing at will and taking more loans or by sharing capital will be a good way to keep it out of falling further into debt.  

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