Financial Statements Part One

Financial Statements Part One

Part 1. Answer the following questions, within 100 words minimum

Need by 7/24/2018

Chapter 10

Managing Working Capital

1. How might inventory and accounts receivables be leveraged for short-term financing?

2. Suppose you own a water purification company that sells and installs reverse osmosis systems for homes and businesses. You have a large profitable job lined up two months away, but after buying all of the supplies, you do not have enough capital to sustain the business until that time. What would you do?

Working Capital

3. What factors determine the amount of working capital that a new small business must budget?

4. Suppose you start a business that has a soft opening and sells half of the expected product in the first quarter. You notice towards the end of the quarter that sales pick up near what was expected. How much working capital might you need to budget ahead of time to overcome this obstacle, and how would you obtain this amount of working capital

Chapter 11

Cash Flow Management

5. What factors are involved in cash flow management as they relate to various payment methods?

6. What kinds of payment terms might the business venture have with its vendor to help manage its cash flow?

7. Suppose you own a small business. Why might it be more beneficial to accept: debit or cash versus a credit or check payment?

Determining Cash Needs

8. How would you determine the need for cash in your business.   Give an example to illustrate your answer.

Chapter 12


9. What is inventory and why is it important for your business, investors or potential lenders? Reserve

Banks as a source of Financing

10. What types of benefits and services must a small business expect from a bank that it has a merchant account with?

11. What other useful tools, such as inventory management assistance or a point of sale system (POS), would a bank offer its customers?

12. Suppose you own a small business and are researching with which bank to open your merchant account. Which benefit, service, or tool offered by banks is most important for you? Explain

Part 2: Funding the Business Need by 7/25/2018

This assignment asks you to describe a new business you’d like to start, as well as the advantages and disadvantages of starting a business from scratch versus buying an existing business.

Assignment Steps

Write a 1,050- to 1400-word paper on funding a business, in which you:

· Describe the various types of funding available to a business, and include at least three examples.

· Explain the advantages and disadvantages of each type of funding.

· Identify the best source of funding for your business, and explain why you selected this source.

· Explain how you plan to grow and support the business over the next 3-5 years.

· Describe the major costs that you will need to cover prior to generating any revenue, and how you plan to cover your cash management.

· Determine your anticipated “break-even” point at which you expect to start seeing a return on your investment (for both your investors and you).

Part 3: Cash Conversion Need by 7/27/2018

One downfall of many small businesses is the inability to keep sufficient cash on hand and to calculate the amount of liquid cash that is necessary for day-to-day operations. This assignment asks you to calculate cash conversion and to determine the funds necessary for the maintenance of business health.

Assignment Steps

Complete Parts 1 and 2 of the Cash Conversion Cycle. Use Microsoft® Excel® to record your calculations. Note: formulas for the cash conversion cycle are included in the document.

Write a 350- to 525-word paper in which you complete the following:

· Explain the difference between permanent and temporary working capital, and describe what a firm could do to minimize risk.

· Evaluate how small adjustments made to total cash conversion can have a large impact upon the financial health of a company.

· Describe Economic Order Quantity (EOQ Using the EOQ formula and an example product for your business, determine the optimal quantity of the item to purchase that will help to minimize the annual total costs of keeping that item in inventory.

· Describe what a Just-in-Time (JIT) inventory system is and its significance in reducing inventory costs.

· Show all cash conversion cycle calculations in a spreadsheet, and attach it as an Appendix.

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