Recently, Warehouse Retailer XS Cargo has decided to close 50 stores across Canada after a failed bid for reconstruction. The downfall of XS cargo occurred due to the emergence of new retailers in the industry.

In my opinion, XS Cargo had to close down because of its failure to adapt to competitors. This falls under financial accounting because they were unable to gain any new assets in time to execute a turn around strategy. As mentioned in the article, the assets of XS Cargo are $15.8 million, while the liabilities are $18.7 million. Furthermore, I feel that it was a poor decision to do a liquidation sale because that shows that the company is not confident in the quality of their product as they are willing to sell it for an incredibly low price. Combine that with the fact that XS Cargo’s liquidation sale was not even much lower than that of the competitor’s base prices, it was easy to see why this strategy did not work. In addition, a look at the company’s debts reveals that they owe money to unsecured creditors. This is a poor use of money as XS Cargo did not gain any assets as collateral and merely added to their growing list of liabilities.

Source: http://business.financialpost.com/2014/09/28/mississauga-warehouse-retailer-xs-cargo-to-close-its-50-stores-across-canada-after-failed-bid-to-restructure/

http://www.thestar.com/business/2014/08/07/xs_cargo_files_for_protection_from_creditors.html

Source: http://business.financialpost.com/2014/09/28/mississauga-warehouse-retailer-xs-cargo-to-close-its-50-stores-across-canada-after-failed-bid-to-restructure/