Answer to Question #238523 in Management for A.V

Question

Diamine ltd is a platinum mining company situated near kimberly in south africa. They are not as large as some of their compitotors, but because of their prime location on a larger placer deposit containing platinum in the earth's crust, they are able to cope well with the demands of production and competition from other, larger mining corporations.
Lately, several Incidents resulting from labour disputes between mine management and the miners themselves have resulted in prolonged strikes. These strikes disrupt production and result in a drop in output that causes significant financial turmoil within the firm. Diamine ltd are forced to sell off several prime acres above the rich deposit in order to ensure that they remain solvent.
Clarify some of the reasons that the CFO might choose to explain the drop in shareholders equity to their shareholders.

Answer 1

Shareholders equity is equal to the sum of asset plus liability. In this scenario, the major reason is lack of productivity which leads to low or no profits and hence decline in shareholders equity. Lack of productivity is brought by the miner's prolonged strikes dues to labour conflicts that are being experienced. These strikes disrupt production and result in a drop in output that causes significant financial turmoil within the firm.