Management Strategies

Question 1

Cash Flow Management Strategies

Answer 1

1. Distribution of Payments
   - reduce shortages
2. Discounts for Early Payments
   - increase speed of accounts receivable turnover
3. Factoring
   - of accounts receivable to increase cash inflows

Question 2

Working Capital Management Strategies

Answer 2

1. Leasing
   - renting assets owned by another
   - increased/better assets
   - more available cash
2. Sale and Leaseback
   - cash from sale
3. Factoring
   - reduces costs of debt collection
   - cash from sale

Question 3

Profitability Management Strategies

Answer 3

COST CONTROLS

1. Managed Fixed and Variable Costs
   - outsourcing
   - leasing
   - cheaper supplier
   - reduce staff
   - use renewable energy
   - JIT
2. Cost Centres
3. Expense Minimisation

REVENUE CONTROLS
1. Marketing Objectives (4 p’s)

Question 4

Cash Flow Management

Answer 4

• identify inflows (max) and outflows (min)
• using cash budgets to predict inflows, outflows,
  surpluses and deficits
• use cash flow statements to detail cash movements
  • monitoring tool

Question 5

Working Capital Management

Answer 5

• choosing the best combination of CA and CL to meet business objectives

CONTROL OF CURRENT ASSETS

a) managing cash
b) managing debtors (AR)
c) managing stock

CONTROL OF CURRENT LIABILITIES

a) managing creditor (AP)
b) managing loans (short-term)
c) managing bank overdraft