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Where are some of the characteristics of a firm with a long cash cycle?
Wiki User
∙ 9y ago
. What are some of the characteristics of a firm with a long cash cycle?
Wiki User
∙ 9y ago
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What does a company's solvency mean?
Solvency refers to a company's ability to meet its long-term obligations through its operations. It is often confused with liquidity, which refers to a firm's ability to meet it's financial obligations with cash and short-term assets it currently holds. A company may be illiquid but solvent; meaning that they are starved of cash (and no one will give them cash), but have long-term assets that are valuable enough to meet obligations in the long-term.
Long term loans are repaid from what source of cash flow?
Long term loans are part of cash flow from financing activities.
Non-spontaneous source of funds?
Non-spontaneous sources of funds are those fund sources that do not occur on the day-to-day operating level of a firm. A working capital manager, for instance, must deal with cash flow surpluses and deficits from day-to-day-operations (spending cash to purchase inventories from suppliers, then receiving cash from customers who purchased on credit) by generating funds to cover cash flow deficits. The job of a working capital manager is non-stop and they must always look for ways to finance their day-to-day operations. For example: a firm purchases raw materials on credit from a supplier. They must pay off this account after 30 days. During this time period, the firm turns these raw materials into consumer goods. Consumers purchase these goods on credit. Before the firm receives the money from the customers who purchased their goods on credit, the firm must pay off the suppliers they purchased the initial materials from (that they used to manufacture the goods that in turn were sold to the customers). This creates a cash flow deficit. The firm must generate the funds needed to pay off their suppliers as they will not receive the money from their own customers until after they are due to pay off their suppliers. These non-spontaneous sources of funds are typically some form of long-term debt: borrowed from lenders that they will pay back at a later time period. Spontaneous sources of funds used to cover these cash flow deficits are usually in the form of straight cash (the most liquid of assets) or marketable securities (money market bonds, etc. that can be quickly sold to cover the cost of their cash flow deficits).
How long can you keep a cashiers check to cash it?
any time only to take yhe cash...
Which financial ratios are used by banks?
1. Liquidity Ratios - Ability of the company to pay off debt 2. Activity Ratios - How quickly a firm can convert its non-cash assets to cash assets 3. Debt Ratios - Ability of the firm to repay long-term debt 4. Profitability Ratios - To Measure the firms use of its assets and control of its expenses to generate an acceptable rate of return 5. Market Ratios - To Measure the investor response to owning a company's stock and also the cost of issuing stock
What is the conclusion on cash management?
Cash is the lifeblood of each and every business. If a firm maintain its cash level at optimum way then it should succeed in long-term. Unless a firm fail to maintain optimum cash level then it has lose its business.
What factors affect the operating cycle?
1. Liquidity Vs Profitability decisions of the firm; The higher a firm retains liquid assets (cash), the shorter the operating cycle2. Industry norms: eg Retail vs construction. A Construction firm will have a longer operating cycle, since they have long term projects, while the bulk of payment is received towards the end of the project. A retail business on the other hand, eg a supermarket has a short or even negative operating cycle, since there are very few credit customers, there is high turnover and can negotiate long credit period with suppliers.3. Management efficiency. The less efficient the management of a firm, the longer the operating cycle and vice versa.
How does maximizing the long-run expected cash flows of the firm translate into maximazing shareholders wealth?
Maximizing the long-run expected cash flows of a firm does not inherently translate into maximizing shareholder wealth. I believe the question that is trying to be posed here is how do long-run expected free cash flows of the firm translate into maximizing shareholder wealth. That answer is because free cash flows are the amount of money available to a firm to either reinvest into the business or distribute out to shareholders. Firms that generate free cash flows and then reinvest in their own business will generally increase their stock price (A company that is making profits and growing will be valued higher) or the firm can pay out some of those free cash flows in the form of dividends (obvious value to the shareholders). Long-run expected cash flows don't prove anything. If I have a million dollars that I want to invest into a lemonade stand, and that lemonade stand costs me $1,000 per month to operate ($1,000 outflow per month) but my monthly revenue is only $800 ($800 inflow per month) then I will have cash flows of -$200 per month. Since I'm ready to invest a million this will be sustainable for quite a long time, but it by no means is maximizing my (me being the sole shareholder) wealth.
Why Profit maximization can never be the objective of a firm?
Profit maximization IS an objective of a firm, but its not the ONLY objective. A firm will have different long term and short term goals which will vary depending on the current business cycle. If you need a more specific answer, please ask a more specific question. - Stavka
What does a company's solvency mean?
Solvency refers to a company's ability to meet its long-term obligations through its operations. It is often confused with liquidity, which refers to a firm's ability to meet it's financial obligations with cash and short-term assets it currently holds. A company may be illiquid but solvent; meaning that they are starved of cash (and no one will give them cash), but have long-term assets that are valuable enough to meet obligations in the long-term.
Does the amount of cash in the bank measure net income?
No. Cash can come from several sources - investors, bank loans, sales of assets (the firm's buildings, or equipment), payments from people who owe the firm money, etc. Likewise, it can go to several places - back to investors, to buy long-lived assets and pay suppliers, etc. Here are a couple of key difference between cash flow and net income (somewhat simplified): When a firm has expenditures that will have value for more than 1 year (i.e. to buy a new factory), this is treated as buying asset, so it does not effect income, but it will effect cash if that's how they paid. The expense from using the factory will be incurred as depreciation over its life. Even though the firm may have used cash to pay for it all up front, it only effects net income a little each year. Net income is difference between revenue and expenses. Revenue can only be recognized when goods are transferred or services rendered, but in the real world this usually doesn't coincide with cash in the bank (because sales are made on credit). Expenses must be recognized at the same time that sales are made. Here is an example to show this: A firm uses cash to purchase $100 of inventory in 2007 and delivers it to a customer at a selling price of $200 in in 2008. The customer finally pays the bill for it in 2009. In 2007, the firm spent $100 in cash, but has no expense for this transaction, because the inventory is still "on the books". It 2008, the firm made $100 of net income on this transaction ($200 revenue - $100 expense) even though no cash traded hands. In 2009, the firm has an extra $200 in the bank, but can not treat it as income because they did not earn the money in 2009 (instead, it is a decrease in accounts receivable). Hope this helps. No. Cash can come from several sources - investors, bank loans, sales of assets (the firm's buildings, or equipment), payments from people who owe the firm money, etc. Likewise, it can go to several places - back to investors, to buy long-lived assets and pay suppliers, etc. Here are a couple of key difference between cash flow and net income (somewhat simplified): When a firm has expenditures that will have value for more than 1 year (i.e. to buy a new factory), this is treated as buying asset, so it does not effect income, but it will effect cash if that's how they paid. The expense from using the factory will be incurred as depreciation over its life. Even though the firm may have used cash to pay for it all up front, it only effects net income a little each year. Net income is difference between revenue and expenses. Revenue can only be recognized when goods are transferred or services rendered, but in the real world this usually doesn't coincide with cash in the bank (because sales are made on credit). Expenses must be recognized at the same time that sales are made. Here is an example to show this: A firm uses cash to purchase $100 of inventory in 2007 and delivers it to a customer at a selling price of $200 in in 2008. The customer finally pays the bill for it in 2009. In 2007, the firm spent $100 in cash, but has no expense for this transaction, because the inventory is still "on the books". It 2008, the firm made $100 of net income on this transaction ($200 revenue - $100 expense) even though no cash traded hands. In 2009, the firm has an extra $200 in the bank, but can not treat it as income because they did not earn the money in 2009 (instead, it is a decrease in accounts receivable). Hope this helps.
What is difference between current assets and long term assets?
Current asset: Cash and other resources that are expected to turn to cash or to be used up within one year of the balance sheet date. (If a company's operating cycle is longer than one year, an item is a current asset if it will turn to cash or be used up within the operating cycle.) Current assets are presented in the order of liquidity, i.e., cash, temporary investments, accounts receivable, inventory, supplies, prepaid insurance Long term asset: Non-current assets. Assets that are not intended to be turned into cash or be consumed within one year of the balance sheet date.
What services are offered by Peachtree Settlement Funding?
The Peachtree Settlement Funding company is a firm that essentially assists people with getting cash from structured settlements. This includes annuities, lottery winnings, and other long-term payments.
How long is a panda's life cycle?
a pandas life cycle is about 22 years long
How long do lizards live What is their life cycle?
how long do lizard live what is their life cycle
Is decrease in long term debt inflow or outflow?
Decrease in long term debt is cash out flow because long term debt decrease when cash payment is done and as cash goes out it is an outflow.
Long term loans are repaid from what source of cash flow?
Long term loans are part of cash flow from financing activities.
