Finance- Improving Cash Flow

Question 0

Solutions of cash flow problems

Answer 0

• Bank overdrafts
• sale of assets
• sale and leaseback

Question 1

Causes of cash flow problems

Answer 1

• seasonal demand
• poor stock management
• over-estimation of sales
• unforeseen changes*

Question 2

Advantages of bank overdraft

Answer 2

• easy to organise
• flexible
• interest payed when overdraft is used

Question 3

Disadvantages of bank overdraft

Answer 3

• flexible interest rates make if difficult to budget accurately
• interest rates higher than for a loan
• expensive in the long run

Question 4

Advantages of sale of assets

Answer 4

• can raise large sums

- might not need the asset

Question 5

Disadvantages of sale of assets

Answer 5

• hard to sell

- reduces capacity

Question 6

Advantages of sale and leaseback

Answer 6

• May bring immediate amount of cash

- reduces need for maintenance cost