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Cash flow managment techniques
Cash flow management objective
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Working Capital Analysis:
Working capital management is critical for business. Inappropriate working capital management will lead to major problems for the operations of the company. Management of the company has to make estimation about future expected sales, costs and so on in order to understand about the future working capital requirements (www.boundless.com). This provide guidelines to the management in raising appropriate funds at appropriate time, this will avoid interruption in the business operations. A company seeking for growth should be make critical analysis about the working capital requirements (finance4smallbusiness.blogspot.in, 2006). For this company, there are three different growth phases which has different decision to be implemented in an orderly manner. In this case, an appropriate analysis of each phase is required for better understanding about the working capital requirement.
Phase 1 - Acquire New Customer:
This decision is being chosen as there is more opportunity to include Atlantic Wellness who is a large player in the health food as the new targeted customer. By acquiring this customer the company encounters various changes which are discussed below.
Increase in sales: Acquiring new customers expands the business base and is expected to generate higher revenue for the company. The sales are expected to increase by $4,000,000 each year for three years constantly. Increase in the revenue of the company is considered to be positive information to both investors and the management. But with regard to working capital management, cash generating capacity of the company is very important. In this case about 30% of the sales equal the amount of accounts receivables which indicates that cash generating capa...
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...h Flow Factor. Retrieved February 9, 2014, from http://www.optionetics.com/marketdata/article.aspx?aid=18509
Rosella (n.d.). Sales trend analysis and Sales forecasting - Excel Addin Software. Retrieved February 9, 2014, from http://www.roselladb.com/sales-trend-forecast.htm
Venturelabinternational.com (n.d.). Mergers & Acquisitions, Part 4: Why is the Free Cash Flow important? Retrieved February 9, 2014, from venturelabinternational.com/mergers-acquisitions-part-4-free-cash-flow/
Www.boundless.com (n.d.). Importance of Working Capital - Working Capital. Retrieved February 9, 2014, from https://www.boundless.com/finance/introduction-to-working-capital/working-capital/importance-of-working-capital/
ValueWalk (2012, February 1). Analysis Using Free Cash Flow | ValueWalk. Retrieved February 9, 2014, from http://www.valuewalk.com/2012/02/analysis-using-free-cash-flow/
Net working capital represents organization’s operating liquidity. In order to compute the net working capital, total current assets are divided from total current liabilities. When there is sufficient excess of current assets over current liabilities, an organization might be considered sufficiently liquid. Another ratio that helps in assessing the operating liquidity of as company is a current ratio. The ratio is calculated by dividing the total current assets over total current liabilities. When the current ratio is high, the organization has enough of current assets to pay for the liabilities. Yet, another mean of calculating the organization’s debt-paying ability is the debt ratio. To calculate the ratio, total liabilities are divided by total assets. The computation gives information on what proportion of organization’s assets is financed by a debt, and what is the entity’s ability to pay for current and long term liabilities. Lower debt ratio is better, because the low liabilities require low debt payments. To be able to lend money, an organization’s current ratio has to fall above a certain level, also the debt ratio cannot rise above a certain threshold. Otherwise, the entity will not be able to lend money or will have to pay high penalties. The following steps can be undertaken by a company to keep the debt ratio within normal
Cost-Benefit Analysis: Deciding, Quantitatively, Whether to go Ahead. (n.d.). Retrieved October 26, 2017, from https://www.mindtools.com/pages/article/newTED_08.htm
(d) The account receivable growth rate from 2012 to 2013 was a decrease of 5.52% whereas the allowance for doubtful accounts went up by 12.10%. The sales account had a growth rate of 33.81%. From these numbers we see that the sales of Hydrogenics Corporation increased from 2012 to 2013. Since there was a decrease in the accounts receivable,
The first important component of DCF needs to be estimated is the expected future Free cash flow of the company. However FCF prediction has already been done by Acker. The relevant data is the estimated cash flow from 2002 to 2008, As well as the real FCF at the end of 2001. all figures in this report is in $ value:
“Return on Sales.” Investopedia. Investopedia US, A Division of IAC., n.d. Web. 25 March 2014.
Exxon Mobil Corporation Financial Statements and Supplemental Information. (31 Dec, 2010). Retrieved on 17 Nov, 2011 from
There are many valuation methods that could be used to evaluate this company. Finding a method that valuates the stand-alone value is difficult. The stand-alone value should be dependent upon the firm’s own assets and projected future income. We decided to evaluate this company based upon two methods: The Discounted Cash Flow Method and the Comparable Companies Method.
Short term liabilities can be met either by cash or marketable securities. Cash can be better utilized in contingencies or can be used in business for very short term operational requirements. It is good for the business to use its large portion of cash for that purpose rather than to meet the creditors’ obligation. So the cash ratio of MCS is very poor and therefore it has to ensure increase in near future.
Kuiper, J. (2011, May 18). What Is Currency Risk? About.com. Retrieved February 14, 2014 from http://internationalinvest.about.com/od/foreigncurrencies/what-is-currency-risk.htm
The following content provided will include information regarding Nikes Inc. cash management strategies, which will include more in depth information from the previous group paper. In addition, working capital recommendations will be provided to senior management base on next year’s in the pro-forma financial statements.
The receivables turnover is based on the assumption that all sales are credit sales. The values of receivables turnover for 2004 and 2005 are 10.21 times and 8.83 times, respectively. This means that IQ’s efficiency is considerably declining in terms of cash collection. The decrease in receivables turnover is explained by the higher increase in average net receivables (71%) than the increase in net credit sales (25%).
Capital budgeting is one of the primary activities of a company. Most of the company uses capital budgeting for decision making process of selecting and evaluating long-term investment. The company have to make a right decision with respect to investment in fixed asset such as purchasing of new equipment and delivery vehicles, constructing additions to buildings and many more. The decision must be right because of the project involve huge amount of cash outflow and it is committed for many years.
How is Warehousing Utilization Impacting Your Business? (2014, January 14). Retrieved April 9, 2014, from Penske : http://www.penskelogistics.com/solutions/warehouse-operations.html
Executive summary of the event. In this business case, a shift from seasonal to monthly production of toys will change the seasonal cycle of Toys World's working capital needs and necessitate new bank credit arrangements. It has to analyze the company's performance, forecast fund needs and make a recommendation. The case introduces the pattern of current assets and cash flows in a seasonal company and provides elementary exercise in the construction of the pro forma financial statements and estimation of fund needs.
"Salary Reports, 2013 Wage Forecast, Market Compensation | WageWatch Ibrief Blog." WageWatch Ibrief Blog RSS 092. N.p., 30 Jan. 2013. Web. 15 Apr. 2014.