Consequences and solutions to cash flow problems Factor | Why It Causes a Cash Flow Problem | Low profits or (worse) losses | There is a direct link between low profits or losses and cash flow problems. Remember - most loss-making businesses eventually run out of cash | Over-investment in capacity | This happens when a business spends too much on production capacity. Factory equipment which is not being used does not generate revenues – so is often a waste of cash | Too much stock | Holding too much stock ties up cash and there is an increased risk that stocks become obsolete (i.e. it can’t be sold) | Allowing customers too much credit | Customers who buy on credit are called “trade debtors” Offering credit to customers is a good way to build revenue, but late payment is a common problem and slow-paying customers put a strain on cash flow
(0.5 points) Credit is borrowed money that you can use to purchase things you need when you need them and then repay the funds back at an agreed on time 2. What is a credit score? (0.5 points) A credit score is a number based on a level analysis of a person's credit files, to represent the creditworthiness of that person. 3. What is installment credit?
(0.5 points) An agreement where a payment is made for the temporary use of a good, service or property owned by another individual or company. 2. What is a financial plan? (1.0 points) Financial Planning is an ongoing process to help you make sensible decisions about spending money that can help you achieve your goals in life. 3.
Financial Management FIN/370 Michael Curtis May 21, 2012 Financial Management Create a list of definitions for the following terms and identify their roles in finance. 1. Finance - Finance is the process of creating, moving and using money, enabling the flow of money through a company. Finance deals with matters related to money and the markets. 2.
You have an income limit with new contributions. (The income limit only applies to new contributions in the Roth IRA). You pick up the ordering rules. (This is where accounting and bookkeeping could become very important). Business Involvement in a Roth 401k.
Make or buy decision a. Be able to identify relevant costs and benefits b. Be able to prepare a financial analysis and make a decision c. Compute the impact of outsourcing on the company’s overall profits 7. Special orders a. Be able to identify relevant costs and benefits; understand the decision rule b.
The debt ratio is total debt divided by total assets. It provides owners with information on how much debt financing is being use to purchase assets. The lower percentages indicate a company finances business operations through cash rather than debt. (Vitez) The debt-to-equity ratio is total debt divided by total equity. This calculates how much of the business is financed through private investors; it is also expressed in percentage form.