Financial management Flashcards
state 2 ways in which direct sales differ from credit sales
direct sales give immediate cash/credit sales have delay in cash arrival
direct sales require dealing with a customer/credit sales through an intermediary
direct sales stock is held by company/credit stock held by intermediary
how would you complete a cash forecast and calculate opening and closing balances for each quarter
add payments element by finding all outgoings each quarter
opening balance is money you start with
closing balance is incomings - outgoings
opening balance for next quarter is closing balance from previous
how would you calculate potential gross profit for each quarter
find total income and total payments for each quarter
profit is income-payment
Use the payback period method to evaluate the initial capital investment, in which quarter does the project become a net income contributor by repaying off the initial investment?
Payback is calculated from when the Cumulative sum of the (receipts–payments) is equal to the investment purchase cost find the point where the sum of money earned has reached the initial investment.
state ways in which a lease option will have an impact on a company’s balance sheet compared to a bank loan
• The machine will not be an asset on the balance sheet if it is leased
• There will be no “liability over 1 year” in the balance sheet associated with a loan if it is leased
• If leased, the overall cash current asset will be higher as there is a net £1500 gain per quarter
How would you create a Payment portion of a cash forecast for the first 8 quarters?
Add up all the Quarterly costs, including initial investments in Q1
In a zero-income scenario, in which quarter does the company run out of cash?
Calculate Quarterly costs (May Vary throughout the Quarters), Subtract costs from initial Investment, until money goes no BRRRRR
