Improving Cash flow
CashFlow: the movement of money into and out of a business
TradeCredit: When a supplier gives a customer a period of time to pay off an invoice
De-stocking: reducing the levels of stock in a business
Changing Cash inflows:
Increasing sales revenue
Improved cash flow from customers
Issuing new shares
Selling off physical assets
Changing Cash Outflows:
Reducing the orders of stocks
Delaying paying invoices
Leasing rather than buying assets
Profit: occurs when revenue is greater than costs over a period of time.
Revenue: the amount of money received from selling goods or services over a period of time.
Profit = Revenue – Costs
Ways of cutting costs:
Revenue = number sold X average price
Ways of increasing revenue:
Break-even point: The level of output where total revenues are equal to total costs.
Variable costs: Costs which change directly with the number of products made by a business
Margin of safety: The amount of output between the actual level of output and the break-even level of output.
Contribution = price per item – variable cost of the item
Break-even level of output = fixed cost / contribution
Break-even analysis can help to:
Achieving future targets
Launching a product
Starting a new business
Share capital: The monetary value of a business that belongs to the businesses owners.
Share: A part ownership in a business
Overdraft: Borrowing money from a bank by drawing more money than is actually in a current account.
Bonds: A long-term loan which typically interest is paid at regular intervals, the loan is repaid at the end of its lifetime; Bonds are traded on stock markets.
Internal sources of finance:
External sources of finance:
Debt –Overdraft, Bonds, Trade Credit
Advantages and Disadvantages:
Availability of finance
Subordinate: workers in a hierarchy who work under the control of a more senior worker.
Chain of command: The path down where orders are passed; in a company,…