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