0
What are some of the characteristics of a firm with a long cash cycle?
Wiki User
∙ 7y agoWant this question answered?
Be notified when an answer is posted
Add your answer:
Earn +20 pts
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 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 are Three basic that the financial manager must be concerned with?
As our discussion above suggests, the financial manager must be concerned with three basic types of questions. We consider these in greater detail next.Capital Budgeting The first question concerns the firm's long-term investments. The process of planning and managing a firm's long-term investments is called capital budgeting. In capital budgeting, the financial manager tries to identify investment opportunities that are worth more to the firm than they cost to acquire. Loosely speaking, this means that the value of the cash flow generated by an asset exceeds the cost of that asset.Regardless of the specific investment under consideration, financial managers must be concerned with how much cash they expect to receive, when they expect to receive it, and how likely they are to receive it. Evaluating the size, timing, and riskof future cash flows is the essence of capital budgeting. In fact, whenever we evaluate a business decision, the size, timing, and risk of the cash flows will be, by far, the most important things we will consider.Capital Structure The second question for the financial manager concerns how the firm obtains the financing it needs to support its long-term investments. A firm's capital structure (or financial structure) refers to the specific mixture of long-term debt and equity the firm uses to finance its operations. The financial manager has two concerns in this area. First: How much should the firm borrow? Second: What are the least expensive sources of funds for the firm?In addition to deciding on the financing mix, the financial manager has to decide exactly how and where to raise the money. The expenses associated with raising long-term financing can be considerable, so different possibilities must be carefully evaluated. Also, businesses borrow money from a variety of lenders in a number of different ways. Choosing among lenders and among loan types is another job handled by the financial manager.Working Capital Management The third question concerns working capital management. The term working capital refers to a firm's short-term assets, such as inventory, and its short-term liabilities, such as money owed to suppliers. Managing the firm's working capital is a day-to-day activity that ensures the firm has sufficient resources to continue its operations and avoid costly interruptions. This involves a number of activities related to the firm's receipt and disbursement of cash.
How long is one billing cycle?
too long , because a payment cycle is one day two max.
What long-term investments should the firm take on?
regfdgfdf
Where are some of the characteristics of a firm with a long cash cycle?
. What are some of the characteristics of a firm with a long cash cycle?
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 do lizards live What is their life cycle?
how long do lizard live what is their life cycle
How long is a panda's life cycle?
a pandas life cycle is about 22 years long
Is cash a short vowel sound?
No, "cash" has a long vowel sound, as the 'a' is pronounced as /æ/, a long vowel sound.
