Chapter 14: Cash: Lifeblood of the Business
trade discounts
% discounts from gross invoice amounts provided to encourage prompt payment
Three primary causes of cash flow problems:
1. difficulty collecting money due from customers 2. seasonal variation in sales 3. unexpected decrease in sales
Most common ways employees steal cash
1. larceny 2. skimming 3. phony disbursements
Purposes of money
1. to make exchanges 2. to keep track of value
growth trap
a financial crisis that is caused by a business growing faster than it can be intended
discount for prompt payment
a reduction in sales price provided to credit customers for paying outstanding amounts in a timely manner
charge back
a reduction in the bank account of a merchant by a credit card company
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 balaances
clearinghouse
an entity that processes checks and electronic fund transfers for banks and other financial organizations
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
bearer
any person or business entity who posesses a security
cash equivalent
assets that may be quickly converted to cash
currency
bills and coins printed by govts
factoring receivables
borrowing money secured by a firm's accounts receivable
deposits and progress payments
cash payments received before product is completed or delivered
cash receipts budget
coming into business
cash disbursements budget
coming out of a business
float
delays in movement of money among depositors and banks
timing purchases
method of controlling the timing of cash outflows that is invisible to suppliers and vendors
demand deposits
money held in checking and savings accounts
cash
money immediately available to be spent
overdraft
negative balance in depositors bank account
commercial paper
notes issued by credit-worthy corporations
noncore projects
rev-producing tasks and activities related to, but not part of , the primary strategy of a business
noncash incentives
rewards that do not require payment of cash, such as stock options, compensating time off, or added vacation days
marketable securities
stocks and bonds that are traded on an open market
consignement
the practice of accepting goods for resale, without taking ownership of them and without being responsible to pay prior to their being sold out
company book balance
the sum of cash inflows and cash outflows recorded in the firms accounting records
bank ledger balance
the sum of deposits and withdrawals recorded in a banks accounting records
bank available balance
the sum of money that has actually been received dand paid out of a depositors account
cash-to-cash style
the time that is required for a business to acquire resources, convert them into product, sell the product, and receive cash from the sale
barter
trading goods and services w/out money
gaming the payment process
using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided
nonsufficient funds
when a check is returned to a depositor bc writer did not have available bank balance
cash budget
when how and why cash is expected to come into the business and leave
