Cash Management

Everything else can be manipulated so easily. There’s a lot of noncash items that be shown on the financial statements and you can manipulate those (like depreciation) to show investors exactly what they want. But at the end, the amount of cash that is readily available in the business after everything has been paid and taken care of is cash flow. So, putting aside all of the measures that everything in list can account for, cash flow is essential to understand if the business is growing or out. If a company’s cash flow is growing year to year, then it would probably be a smart company to invest in.

The capital budgeting techniques that best recognize the time value of money are those that involve discounted cash flow. There are variety of methods and techniques that a business can use to facilitate capita... ... middle of paper ... ...siness both small and large sized manufacturing business. Any business that invest in any kind of project without understanding the risks and returns involved will results loss of capital and no chance of surviving in the competitive marketplace. Capital budgeting decisions helps to make two important decisions, a financial decision and an investment decision. To develop and formulate long- term strategic goal capital budgeting is much necessary.

In every business, or household for that matter, there will always be two separate balances for cash. The first refers to the actual recorded amount on the corporate books, while the second is represented by the balance that the bank shows. The difference between these figures, or the float, means that a business can take advantage of short term cash to use for other means. For example, if a company writes $1,000 worth of checks to vendors and receives $1,000 from customers, there would be no difference in what the ... ... middle of paper ... ...ve known it, is on life support. Check 21 may not have been designed for the purpose of eliminating float time, but it most certainly has achieved this as a by-product.

Cash management techniques include collection/disbursement float, Electronic Funds Transfer, international cash management, and marketable securities. The second part of this paper will compare and contrast the methods of short-term financing that are available to a financial manager and his or her company. Methods of short-term financing include trade credit, bank loans, commercial paper, foreign borrowing, receivables financing, and inventory financing. Description of Cash Management Techniques Float is the difference between a company’s recorded amount of available cash and the amount that has been credited to the company by the bank that results from time delays in certain processes within the banking system, such as mailing and clearing checks. Companies “play the float” in order to decrease collection times or extend disbursement dates, allowing them to have more cash on hand to use for interest building securities.

Different sources of finance The report will now list the different sources of finance available, starting with sources available to small and new businesses to sources only obtainable to big companies. External Sources of Finance This source of finance comes from outside the business and involves the business owing money to an outside individual(s) or companies. Personal Savings This mainly applies to sole traders, partnerships and small private companies. Owners may use some of their own money as capital to invest in the business. Usually this option is used by the person(s) who will... ... middle of paper ... ...business plan * Details of how much finance is needed and how it will be used * The most recent trading figures of the company, a balance sheet, a cash flow forecast and a profit forecast * Details of the management team, with evidence of a wide range of management skills * Details of major shareholders * Details of the company's current banking arrangements and any other sources of finance * Any sales literature or publicity material that the company has issued.

Short Term Long Term Trade credit Mortgages Factoring Profit retention Leasing and hire purchase Venture capital Loans Equity Trade credit This is a useful source of finance provided by suppliers. With trade credit, a business can use the goods or service provided by suppliers before they are paid for. The credit period is simply the period between receiving a good or service and paying for it. Although no charge or rate of interest is attached to trade credit, cash discounts may be lost if payments are not made within the agreed time. Overdraft An overdraft is probably the most frequently used solution to cashflow problems.

Recommendations 6 References 7 1. Introduction This report briefly introduces the current financial position of Revive Marketing, and discusses the reasons behind these financial data. The main issue discussed in this report is why an improvement of profit has been noticed during the accounting period while cash position has not been increased. This report contains information that is calculated under accrual accounting principle. Because all transactions are recorded at the time when they are made rather than when actual money has been made or received, there is a likelihood that transactions are shown on one accounting period but actual change has not be made it, and it may deliver biased information about the company’s true financial position.

Analysing the cash flow problems that a business might experience Cash flow problems can be caused by a variety of factors these problems can destabilize the amount of income which will prevent the payment of liabilities that make a business function. The main causes of cash flow problems are: • Low profits or (worse) losses • Over-investment in capacity • Too much stock • Allowing customers too much credit • Overtrading • Unexpected changes • Seasonal demand Each point will be assessed in this document. Low profits or (worse) losses Profit and losses are the main points to be considered in a business because a business is run by the amount of profits they receive. If there is a dent in profit then the business is not functioning correctly which will be a problem to the business. Having a cash flow that is predicting a profit is vital because it shows that the business is heading in the right direction.

The companies have to lose something when getting the fund as well as the other advantages comes from going public. There are several disadvantages that the companies may suffer. First, being publicly listed in a stock market is not being done in an easy and simple way. For a company to trade its stock in stock market, following the requirements of Securities Exchange Act 1934 as well as other regulations monitored by Securities Exchange Commission (SEC) is compulsory. Primary requirements of Securities Exchange Act 1934 include disclosure of periodic financial report which consists of the revenue, cash flow and assets of a company.

Capital structure analysis Liquidity Liquidity is the important meaning of financial risk and solvency. It refers to the extent to which assets can be converted into cash without affecting the asset 's price during normal business operations. Because of the cash flow problem and especially the cash flow problem, many enterprises are bankrupt. As a result, the liquid ratio or the current ratio are used to compare the capacity of the short term debt between the two different companies. At first, the current ratio is a sign of the company 's market liquidity and ability to meet the requirements of the creditors., which is just the flow of assets divided by current liabilities.