Tamarssa Nicole Roberts
Professor Scott Hicks
TAMARSSA NICOLE ROBERTS
DB3-IS CASH KING?
The cliché phrase that cash is king is not necessarily specific to paper cash, but the cash flow itself. Because cash flow is the difference between a business’s inflows and outflows; where its income is not counted until accounts are paid, and expenses are not considered until payment is made, it is important that much is relied on forecast. Because business generally come against risk factors, such as introducing new products not yet launched, management teams should find ways to protect its cash flow. Research suggests, in respect to new project development, that by using certain identifying techniques and analyses, that “financial managers need to look behind the forecasts to try to understand what makes the project tick and what could go wrong with it (Brealey, Myers, & Marcus, 2012)”.
As the CFO of struggling company with a newly launched, potentially stable product, grouped with a phenomenal management team, it is fundamental to consider any immediate means of raising capital—no matter if, the current cash flow is positive. Knowledgeable that production is in work with a two-year release time, it is obvious that funds will soon deplete. In an effort to retain happy stakeholders, salvage the company from demise, and prosper the new product, management must find ways to protect its current cash flow. Many times companies attempt to raise capital by reducing costs; this can be a positive move as long as they do not slack on quality. Researchers, Kaiser and Young, suggest that companies use their ideal six-stage strategy to pull funds from its working capital by way of the balance sheet (Karabell, 2009) : 1. Don’t manage the bottom line
2. Don’t reward your staff for growth alone
3. Make sure customer will pay for quality
References: Brealey, R. A., Myers, S. C., & Marcus, A. J. (2012). Fundamentals of corporate finance, 7th ed. . New York: McGraw-Hill/Irwin.
Briggeman, B. C., & Boehlje, M. D. (2009). Cash is king - but profitability is the kingdom! The Journal of the ASFMRA, 94-98. Retrieved from http://search.proquest.com/docview/219566043?accountid=12085 .
Karabell, S. (2009). Cash is king, so work your capital. INSEAD Articles, Retrieved from http://search.proquest.com/docview/288403963?accountid=12085 .
Women 's Devotional Bible 2, NIV. (1995). Grand Rapids: Zondervan Publishing House.
Please join StudyMode to read the full document