MKT 4300 CH. 14

cash can come from three sources

1. Cash can be obtained by selling the products and services of the business and collecting cash from customers. Called cash flow from operations 2. Cash can be obtained from investments the business has made, such as stocks, bonds, land, buildings, or equipment - Called cash flow from investing. 3. A business may obtain cash through financing.

Three primary causes of cash flow problems:

1. difficulty collecting money due from customers 2. seasonal variation in sales 3. unexpected decreases in sales

growth trap

A financial crisis that is caused by a business growing faster than it can be financed.

timing purchases

A method of controlling the timing of cash outflows that is invisible to suppliers and vendors.

overdraft

A negative balance in a depositor's bank account.

charge back

A reduction in the bank account of a merchant by a credit card company.

cash disbursement budgets

A schedule of the amounts and timings of payments of cash out of a business.

nonsuffiecient funds

A situation that occurs when a check is returned to a depositor because the writer of the check did not have a bank available balance equal to or greater than the amount of the check.

payables

Amounts owed to vendors for merchandise or services purchased on credit

receivables

Amounts that are owed to a business for merchandise that was sold on credit

reconciling

An accounting process that identifies the causes of all differences between book and bank balances.

clearinghouse

An entity that processes checks and electronic fund transfers for banks and other financial organizations.

bearer

Any person or business entity who possesses a security.

factoring receivables

Borrowing money secured by a firm's accounts receivable.

Deposits and progress payments

Cash payments received before product is completed or delivered.

float

Delays in the movement of money among depositors and banks.

demand deposits

Money held in checking and savings accounts.

commercial paper

Notes issued by credit-worthy corporations.

trade discounts

Percentage discounts from gross invoice amounts provided to encourage prompt payment.

marketable securities

Stocks and bonds that are traded on an open market.

consignment

The practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold.

barter

The practice of trading goods and services without the use of money.

bank ledger balance

The sum of deposits and withdrawals

purpose of money

To make exchanges To keep track of wealth or value

gaming the payment process

Using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided.

cash budget

identifies when, how, and why CASH is expected to come into the business, and when, how, and why it is expected to leave.

techniques to increase cash inflows

-deposits and progress payments -discounts for prompt payments -noncore projects -factoring receivables

techniques to decrease cash inflow

-trade discounts -noncash incentives -consignment -barter -timing purchases -gaming the payment process

Discounts for prompt payment

A reduction in sales price provided to credit customers for paying outstanding amounts in a timely manner.

cash receipts budget

A schedule of the amounts and timings of the receipts of cash into a business.

short-term debt

Any debt that must be paid in less than one year from the date of the financial statement on which it is reported.

cash equivalents

Assets that may be quickly converted to cash.

Most common ways employees steal cash

Larceny- steal cash after in register Skimming- hiding the sales Phony disbursements- fake invoices

noncore projects

Revenue-producing tasks and activities related to, but not part of, the primary strategy of a business.

company book balance

The SUM of cash inflows and cash outflows Usually called the cash account

bank available balance

The sum of money that has actually been received and paid out of a depositor's account.

Cash to cash cycle

The time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale. Also called operating cycle