Methods Of Improvinf Cash Flow Problems

Question 1

What is the first way of solving cash flow problem + two ways

Answer 1

• rescheduling payments

1. Increase speed of cash inflows = request 30 day payment instead of 90 days = lose sales due to rescheduling & no flexibility
2. Decrease speed of cash outflows = delay payments to suppliers = damage supplier relationship = depends on their importance (reference P’s 5 forces)

Question 2

What is the second solution to cash flow problems

Answer 2

• increase cash inflows

• run a marketing campaign to ^^ sales = ^^ costs
• increase selling price = low sales = how sensitive is ur customers to price changes

Question 3

What is the third solution to cash flow problems

Answer 3

• decreasing cash outflows

- hold less stock = less storage costs = save = less sales = less revenue

Question 4

What is the 4th solution to cash flow problems

Answer 4

• use sources of finance e.g. overdraft

• quick & easy to set up = resolve unexpected expenditures
• pay interest = ruins credit rating