Improving cash flow and profit

Question 1

How can profit and profitability be increased?

Answer 1

Reducing expenditure on fixed and variable costs

Increasing the selling price per item

Question 2

What are the challenges of improving profitablity?

Answer 2

Trying to reduce expenditure on fixed and variable costs can reduce quality which may reduce sales and therefore possibly revenue
Increasing the selling price can deter customers from purchasing products which can decreease sales volume and market share

Question 3

What are the challeneges of improving cash flow?

Answer 3

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.