27990424
Description
Mind Map by Gianna Chibesa, updated more than 1 year ago
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Created by Gianna Chibesa
over 5 years ago
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Chapter 22 - Cash
- Cash inflows: sums of
money received by a
business over a certain
period of time.
- Borrowed money
- Internal sources
- Share capital, investors
- Share capital, investors
- External sources
- Loans
- Loans
- Internal sources
- Sales revenue
- Increase sales rev. by increasing price
(if the product is inelastic),
- Selling in bulk for slight discounts to increase
no. of units sold.
- Offer complementary services
- Sales promotion
- Sales promotion
- Increase sales rev. by increasing price
(if the product is inelastic),
- Stock
- Do not overstock; costs
tied up in keeping
inventory. Waste
- Do market research; product more likely to succeed
and so sells. Estimation of demand and set
appropriate reorder levels
- Use JIT (lean production) to hold requisite stocks for sales only.
- Do not overstock; costs
tied up in keeping
inventory. Waste
- Trade receivables
- Borrowed money
- Cash Outflows: sums of
money paid by a
business over a period of
time
- Wages/salaries
- Suppliers
- Purchase of non-current assets e.g. buildings
- Creditors - people
whom the
business owes
- Paying back interest on loans
- Wages/salaries
- Why is cash important?
- Anything that contributes to the
running and/or profitability of the
business depends on cash to fulfill.
- Suppliers - continue
productivity - have products to
sell and earn revenue
- Workers - motivational, but also a legal requirement - will continue
to work for the business at creating/delivering the product or service
- loyalty, production
- Otherwise, the business will be forced into liquidation
- Profit-sharing
- Otherwise, the business will be forced into liquidation
- Rent, bills, and other overheads - these are
fixed costs and cash is important in order to
pay them so that the business infrastructure
can operate.
- Suppliers - continue
productivity - have products to
sell and earn revenue
- Anything that contributes to the
running and/or profitability of the
business depends on cash to fulfill.
- Finance
- What affects the financing chosen?
- Amount needed
- Size & nature of the firm
- Time span
- Control of the firm
- Risk and gearing
- Amount needed
- Uses of finance
- Starting up a business
- Owners need finance for the current and
non-current assets required before they
begin to start trading
- Owners need finance for the current and
non-current assets required before they
begin to start trading
- Expansion of the business
- Large sums of money are required for finance,
whether internal or external. Expanding increases
chances of high profit, recognition, EcOSc
- Large sums of money are required for finance,
whether internal or external. Expanding increases
chances of high profit, recognition, EcOSc
- Working captital
- AKA the 'lifeblood' of a firm. Money available to a
business in the short term to pay for day-to-day
expenses.
- WC = Current Assets - Current Liabilities
- AKA the 'lifeblood' of a firm. Money available to a
business in the short term to pay for day-to-day
expenses.
- Starting up a business
- Management of large amounts
of money; to provide funding
for...
- What affects the financing chosen?
- Will banks lend the money?
- What other sources of finance
are you utilising? Do you have
existing loans?
- Please show us your previous income
statement and a projected one. Will you
be making any profit?
- Please show us your cash
flow accounts showing
how you will use the
finance if given.
- What are your future plans
in terms of your financing?
(from the business plan)
- Do you have any
security to present
for the loan?
- What other sources of finance
are you utilising? Do you have
existing loans?
- Will shareholder's invest in the firm?
- How has the share price varied over the
past few years?
- What are the prospects for expansion and growth?
- What is the competitors'
share price?
- What does the income statement indicate? The profits
could show the potential for higher dividends.
- How has the share price varied over the
past few years?
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