• Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

Sources of Cash Flow Problems

Extracts from this document...


´╗┐Sources of Cash Flow Problems Overtrading Young and fast growing companies are particularly prone to over-trading. Over-trading occurs when a business is attempting to fund a large volume of production with inadequate working capital. Investing too much in fixed assets In the initial stages of a business funds are limited, spending large amounts on equipment, vehicles and other capital items drains resources, it may be better to lease some fixed assets and leave some cash funds. Stockpiling Holding stocks of raw materials and finished goods is expensive. ...read more.


One of the dangers of this is that firms allow their customers too long for payment. This means that a firm may be waiting for payment and may be forced to borrow for this period. Failure to control debtors may lead to bad debts. Taking too much credit Taking more credit may appear to help a firm?s cash position as cash payments are delayed. However some drawbacks include higher prices, lost discounts and creating a bad name in the trade. Over borrowing Businesses may borrow to finance growth. ...read more.


Unforeseen expenditure Businesses are subject to unpredictable external forces. They must make a financial provision for unforeseen expenditure (e.g. equipment breakdown, strikes, bad debts etc) Unexpected changes in demand There are times when demand for a product unexpectedly falls. Fashion changes could lead to a fall in demand which in turn leads to a lack of cash flowing into the business Seasonal factors Sometimes trade fluctuates for seasonal reasons. In farming cereal farmers have a large inflow when their harvest is sold, for most of the year they have to pay expenses without any cash flowing in. This situation requires careful management indeed, although it is possible to predict these changes. Sources of cash flow problems ...read more.

The above preview is unformatted text

This student written piece of work is one of many that can be found in our International Baccalaureate Business Studies section.

Found what you're looking for?

  • Start learning 29% faster today
  • 150,000+ documents available
  • Just £6.99 a month

Not the one? Search for your essay title...
  • Join over 1.2 million students every month
  • Accelerate your learning by 29%
  • Unlimited access from just £6.99 per month

See related essaysSee related essays

Related International Baccalaureate Business Studies essays

  1. BP Financial analysis

    Other Businesses and Corporate Segment (inc Alternative energy) For fiscal year 2009, the other businesses and corporate division accounted for revenue of USD$ 2,843 million, representing a decrease of 38.65% over revenue in 2008. The company's capital expenditure totalled USD$ 1,299 million, as compared to USD$ 1,839 million in 2008.

  2. New business plan

    high cost due to more services provided than food * High set up cost- as we are seeking high quality food and service, so we will do a lot initial decoration of the restaurant, so the initial set up cost is high * New to market- we are new to

  1. MG 309 Strategic Management

    The employees filled them during their free time and handed in. * The questionnaire were randomly distributed based on the heterogeneous group, i.e., equally distributed among gender, ethnicity different ability and status. Refer to Appendix B & C. 2.) Secondary data was collected through: (i)

  2. Difference in working culture of Malaysia & Singapore

    The World Bank notes Singapore as the easiest place in the world to do business. Singapore is a parliamentary republic with a Westminster system of unicameral parliamentary government. The People's Action Party (PAP) has won every election since the British grant of internal self-government in 1959.

  • Over 160,000 pieces
    of student written work
  • Annotated by
    experienced teachers
  • Ideas and feedback to
    improve your own work