Small Business MGMT Ch. 14
2 Primary causes of float
(1) delays in transferring money among banks due to international procedures (2)delays in delivering checks from the writer of the check to recipient's bank
Cash Budget
A 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
Growth Trap
A financial crisis that is caused by a business growing faster than in 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
Discounts 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
Cash Disbursements Budget
A schedule of the amounts and timings of payments of cash out of a business
Cash Receipts Budget
A schedule of the amounts and timings of the receipt of cash into a business
Non sufficient 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
Operating Cycle
Also known as Cash-to-Cash Cycle
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
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 possesses a security
Cash Equivalents
Assets that may be quickly converted to cash
Factoring Receivables
Borrowing money secured by a firm's accounts receivable
Deposits and Progress Payments
Cash payments received before product is completed of delivered
Comprehensive Budget
Comprehensive budgets are often referred to as master budgets
Float
Delays in the movement of money among depositors and banks
Demand Deposits
Money held in checking and saving accounts
Commercial Paper
Notes issued by credit-worthy corporations
Trade Discounts
Percentage discounts from gross invoice amounts provided to encourage prompt payment
Noncore Projects
Revenue-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
Barter
The practice of trading goods and services without the use of money
Company Business Balance
The sum of cash inflows and cash outflows recorded in the firm's accounting records
Bank Ledger Balance
The sum of deposits and withdrawals recorded in a bank's accounting records
Bank Available Balance
The sum of money that has actually been received and paid out of a depositor's account
Processing Float
The time required to move checks among payers, payees, and banks
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
Gaming the Payment Process
Using methods to appear to be paying bills on time, when in fact payment is being delayed or avoided