Understanding Cashflow Essay

1177 words - 5 pages

Understanding Cashflow

Within an organisation, money comes in and flows out. This is called
the organisation's cashflow.

From time to time, business managers may pose questions such as:

* 'Can we afford to buy x?'

* 'Are we going to be able to pay that bill?'

* 'Wouldn't it be nice if we could develop y?'

To answer such questions, they will often have to carry out some form
of financial planning, and often to seek additional finance from
outside the company. The key issues are:

* What is the finance for?

* How long will it be needed?

* Is it affordable, i.e. can the firm keep up with the repayments?

Common methods of finance

Sources of finance fall into two main categories. Short-term finance
is designed to be paid back quickly, while long-term loans may be paid
over many years.

Short Term

Long Term

Trade credit



Profit retention

Leasing and hire purchase

Venture capital



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.


An overdraft is probably the most frequently used solution to cashflow
problems. The bank sets an agreed limit on the customer's bank
account, beyond which they will not draw. This is called an overdraft
facility. The amount the customer borrows is called an overdraft.

A special charge is made for setting up the overdraft on a daily
basis. Businesses often depend on customers paying bills promptly.
Given that customers like Ron Rust may delay payment as long as
possible, an overdraft can be a useful form of short-term business


Trade debts mean that money can often be tied up for as much as sic
months. For a business requiring cash quickly this can be a real
problem. A factoring company may offer immediate payment of part of
the amount owed to a business - normally around 80% with the balance
being paid when the debt is settled. This provided an immediate way
for a business to improve its cashflow. In return, the factoring
company will charge a fee which includes interest and administration

Leasing and hire purchase

There are many different ways for customers to receive goods and make
payments over time.

Goods on hire purchase remain the property of the finance company
until the customer has made all the payments. Other credit purchasing
schemes enable the goods to belong to the customer from the...

Find Another Essay On Understanding Cashflow

Change Management Essay

2722 words - 11 pages term. The top changes that firms have implemented since the onset of the crisis are both aimed at improving cashflow: spending cuts and reduction of headcount. These sorts of change can be implemented quickly and have an almost immediate impact on liquidity. (The Economist, 2009)However, it must be noted that there is a danger of launching change initiatives too rapidly and with too heavy a focus on short-term objectives.Scope of Change Programmes

Lester Electronics Financing Alternative Benchmarking MBA 540 week 5

5727 words - 23 pages available and the new options of finance is a premier factor for the management team to create guidelines and determine the new instruments of finance for the organization.Duplication of operations does not equal doubling of profitability. Strategy, position, market presence and knowledge all play an important role in the determination of growth opportunity and wealth or profit maximization. Both Shang-wa and LEI know the importance of understanding the

Extraordinary Circumstances: Developing Strategies for a Global Outsource Provider

3039 words - 13 pages Five Factor Analysis 8 Figure 4- Gartner’s magic quadrant for data center outsourcing 9 Figure 5- CSC business drivers 11 Figure 6-Stock Performance- Dividend Ratio Payout (%) 20 Figure 7-Stock Performance- Dividend Yield (%) 20 Figure 8-Stock Performance- Earnings Yield (%) 20 Figure 9-Stock Performance - Price/Book Value Ratio (Times) 20 Figure 10-Stock Performance- Price/Cashflow Ratio (Times) 20 Figure 11-Stock Performance- Price/Earnings Ratio

Unit 1, Business at work

3960 words - 16 pages more efficiently because they had existing records i.e. cashflow/accounts that tells the business where to go next in their strategy in achieving a better Ltd company. Scream would evaluate their achieved objectives and to continue with these to their next financial year such as, to increase their company turnover from last year and so on.Although Scream directors never gave me an actual turnover from their last year account, they did however

Yahoo Financial Analysis

3073 words - 12 pages understanding of local customer and business preferences.Yahoo has also expanded its strategy by diversification. It provides users with information such as financial information, shopping, movie listings, etc.Historical growth AnalysisHistorically, Yahoo has generated much of its revenue from the sales of advertising (74% and 68% of its 2003 and 2002 revenues account for its marketing services). From its media advertisements, sponsorships, and text-link

how information system support business processes in an organization

7620 words - 30 pages necessarily on what's good for the organization, but what's good for the players involved in the process. Compromise is more the norm than clear-cut decisions. The goal of this type of organization is to blend the interests of the players into a decision that satisfies as many people or entities as possible.Implications for the Design and Understanding of Information SystemsEvery time you make a new decision, you start the whole decision-making

Reality and Illusion in Shakespeare's Hamlet - Reality, Appearance and Deception

896 words - 4 pages Reality and Illusion in Hamlet   Shakespeare’s play, Hamlet, begins with the appearance of a ghost, an apparition, possibly a hallucination. Thus, from the beginning, Shakespeare presents the air of uncertainty, of the unnatural, which drives the action of the play and develops in the protagonist as a struggle to clarify what only seems to be absolute and what is actually reality. Hamlet's mind, therefore, becomes the central force of the

Sub-plots in Hamlet

1118 words - 4 pages Sub-plots in Hamlet   There are many things that critics say make Hamlet a "Great Work," one of which is the way that Shakespeare masterfully incorporates so many sub-plots into the story, and ties them all into the main plot of Hamlet’s revenge of his father’s murder. By the end of Act I, not only is the main plot identified, but many other sub-plots are introduced. Among the sub-plots are trust in the Ghost of King Hamlet, Fortinbras, and

Hamlet as Victim and Hero

1301 words - 5 pages Hamlet as Victim and Hero      Hamlet, Prince of Denmark, a Shakespearean tragedy, tells the story of Prince Hamlet, who gained the knowledge of a terrible incident that his kingdom had suffered. Claudius, the king of Denmark and Hamlet's uncle, had killed his own brother, the king, who was also the father of Hamlet, and married his brother's widow. Hamlet suffered these traumas to a severe degree, and his only relief was to defeat his

Essay on Light and Dark in Antigone

1188 words - 5 pages Use of Light and Dark in Antigone   The "Golden Age" of Greece is noted for its many contributions to the creative world, especially in its development of the play. These performances strived to emphasize Greek morals, and were produced principally for this purpose. Antigone, by Sophocles, is typical. The moral focused on in Antigone is the conflict between physis (nature) and nomos (law), with physis ultimately presiding over nomos

charant Creon as the Main Character of Antigone

1231 words - 5 pages Creon as the Main Character of Antigone   Throughout the Greek play Antigone by Sophocles, there exists a dispute as to who should receive the designation of main character. Antigone, the daughter of the cursed King Oedipus, as well as Creon, stately king of Thebes, both appear as the key figures in this historic play. I believe that Creon, king of Thebes, should be considered the main character in this work of Greek theater. Three

Similar Essays

Management Essay

647 words - 3 pages communication. During the program, students can choose to take co-op to gain experience and money to help support themselves.Once you earn your degree, you have not totally become a certified Management accountant. You must write an examination in which you have to get a Grade of C or higher. Then complete a two-year CMA Strategic Leadership Program, while doing so, you will receive a vast knowledge and understanding of the management accounting

Ratio Analysis Paper

1236 words - 5 pages IntroductionIn this paper, I will discuss the profitability, liquidity, and solvency ratios that affects acompany. The limitations of ratios and bench marking capabilities. Along with three questionsthat would provide good information about what ratios are important, which ones are importantto internal management and which ones are important to the creditors. The reader would have abetter understanding of each of the items that will be discuss

Ims Data Warehouse Essay

3449 words - 14 pages South Korea's largest retailers, must work harder than ever to distinguish itself from the competition to attract and retain customers in the country's intensely competitive retail environment.Goal- Reach the right customers with the right offers through a customer relationship management (CRM) system.Results - Hyundai has increased its direct mail response rates by better understanding trends and customer tendencies through customer and sales

'easy Jet The Web's Favorite Airline' Essay

3169 words - 13 pages ......................................................................41.3 The competitive Environment in the Airline Industry up to 1999................................51.4 Understanding the overall attractiveness in the Airline Industry................................71.5 Possible Strategies for Further Success..........................................................................8Question B Critically upraise the strategies pursued by SteliosHaji-Ioannou over the period of the case, and assess to what