2. Improving Cash Flow and Profits

Question 1

Challenges of Improving Profitability

Answer 1

Trying to reduce expenditure on fixed and variable costs can reduce quality which may reduce sales and therefore also reduce revenue.

Increasing the selling price can deter customers from purchasing products which can decrease sales volume and market share.

Question 2

Challenges of Improving Cash Flow

Answer 2

Removing or reducing trade credit periods for customers can reduce customer satisfaction which may reduce sales volume and market share.

Asking suppliers to increase trade credit periods can create tension between the business and its suppliers which may result in poorer relationships and reduced dependability.