Chapter 13: Cash: Lifeblood of the Business (BOOK)

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 Budgets

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.

Nonsufficient Funds (NSF)

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.

Comprehensive Budget

Also often referred to as master budgets, are sets of budgets that detail all projected receipts and spending for the budget period.

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.

Money

An accepted medium of exchange.

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.

Factoring Receivables

Borrowing money secured by a firm's accounts receivable.

Demand Deposits

Money held in checking and savings accounts.

Cash

Money that is immediately available to be spent.

Commercial Paper

Notes issued by creditworthy corporations.

Operating Cycle

See cash-to-cash cycle.

Cash Equivalents

Assets that may be quickly converted to cash.

Deposits and Progress Payments

Cash payments received before product is completed or delivered.

Trade Discounts

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

Cash Flow Management

Planning and tracking the amounts and timing of money to be received and paid during the business cycle.

Marketable Securities

Stocks and bonds that are traded on an open market.

Currency

The bills and coins printed by governments to represent money.

Noncore Projects

Revenue-producing tasks and activities, related to, but no 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.

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.

Company Book 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.

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.

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.