Things to include in the answer:

P4 Explain the advantages and disadvantages of different types of planning tools used for budgetary control. M3 Analyse the use of different planning tools and their application for preparing budgets and forecasts.

D3 Evaluate how planning tools for accounting respond appropriately to solving financial problems to lead organizations to sustainable success.

M3 Analyse the use of different planning tools

LO3

Case Study 3 - Hertz Gone Off Road Forever.

Hertz Global Holdings Inc., the car-rental company founded with a dozen Ford Model Ts over a century ago, filed for bankruptcy after sweeping travel restrictions and the global economic collapse destroyed demand for its vehicles.

Hertz, originally known as Rent-a-Car Inc., was founded in Chicago in 1918. It was operating 12,400 locations worldwide as of February.

The Chapter 11 filing in Delaware allows Hertz to keep operating while it devises a plan to pay creditors and turn around the business. The second-largest U.S car-rental-car company does not need debtor-in-possession financing for now, according to a person familiar with the matter, because it has more than $1 billion cash on hand. Hertz's court petition listed about $25.8 billion in assets and $24.4 billion of debts, and its biggest creditors include IBM Corp. and Lyft Inc.

"With the severity of the Covid-19 impact on our business, and the uncertainty of when travel and the economy will rebound, we need to take further steps to weather a potentially prolonged recovery," Paul Stone, Hertz's Chief Executive Officer

After the coronavirus pandemic decimated revenue, the car renter sought relief from lenders and a bailout from the U.S. Treasury Department. But while it managed to negotiate a short-term reprieve from creditors, it wasn't able to work out longer-term agreements.

While all travel-related companies have been hurt by the pandemic, a big part of what's weighed on Hertz is its strategy of owning or leasing a large portion of its fleet outright instead of acquiring them through buyback agreements with manufacturers. Hertz typically responds to falling demand by selling cars from its fleet but has been hit especially hard by the drop in prices at used-car auction rates as well.

Hertz said it has enough cash for now to support its operations, which include Hertz, Dollar, Thrifty, Firefly, Hertz Car Sales, and Donlen. But it might need to raise more, perhaps through added borrowings while the bankruptcy process moves forward

"Hertz may have little choice but to scale down its operations and sell assets to pay down its significant secured debt," Joseph Acosta, a partner in the bankruptcy practice at the law firm Dorsey & Whitney, said in an email. "Hopefully, the restructuring expenses will not bury the company in the process."

The company began laying off workers to preserve cash in March as emergency measures to contain the virus halted business and leisure travel. Hertz disclosed on April 29 that it had missed substantial lease payments related to its rental cars.

Source - @2020 Bloomberg L.P & Gulf Business News

Given the above scenario, you will now prepare a 'formal report' while evaluating how financial accounting tools would appropriately help resolving problems in leading organizations to attain organizational success, while analyzing the below points. You are required to research and discuss the concepts critically.

• Evaluate the merits and demerits of different types of planning tools while analyzing their application in preparing budgets and forecasts so that adequate steps could have been taken to avoid the bankruptcy situation at Hertz. Compare and analyze how by adopting effective management accounting systems, company can now respond to financial issues leading to attainment of sustainable success.
• Discuss and analyze the shortcoming in the present management accounting practice leading to the failure of the travel company.
• Evaluate and recommend how planning tools for accounting respond appropriately to solving financial problems which can help Hertz to regain operational continuity & sustainable success.