mini quest

Business & Finance
Tutor: None Selected Time limit: 1 Day

  • How should a business use working capital analysis?
  • Which is more important to the short-term lender: the stock of cash or the flow of cash?
  • Is it possible in today's business to operate with no current liabilities?
  • May 14th, 2015

    Business should use Capital analysis by:

    Knowledge of cash inflow and out flow is crucial-need to know debtor days and creditors days and stock days on hand is important as this is the driver of the cash cycle.

    The flow of cash is more important to a short term lender

    Cash is readily available and will be used for lending purposes immediately.

    In today's business is impossible to operate without current liabilities as:

    a)Most businesses like to be offered credit days, which affects the sellers cash flow and in most cases a financial institution will come in to bridge the gap by way of short term overdrafts all other facilities.

    b) Mostly big buyers prefer to pay by cheques.This will take time to clear hence need to have some financial support as the cheques clear as more goods need to me purchased in the mean time.

    May 14th, 2015

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