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2.5.1
2.5.2
2.5.4
2.5.3
100
Refers to the money that is available for the day-to-day running of the business
What is Working Capital
100
The lifeblood of a business’s daily operations
What is Working Capital
100
The short-term debt of the business
What is Payables
100
A contract between an owner of an asset and a business which seeks to use the asset but chooses not to purchase it.
What is A Lease
200
When the current assets are greater than the current liabilities
What is positive (+ve) working capital
200
A business’s most liquid asset
What is Cash
200
Some businesses use _____ as a substitute for such things as controlling receivables
What is Loans
200
A common source of finance, particularly for small business, and allow a business to draw more funds out of their account than are actually there
What is Overdrafts
300
When current assets are less than current liabilities
What is Negative (-ve) working capital
300
Businesses frequently extend a line of credit to some customers when they purchase their goods or services
What is Accounts Receivables
300
Is established by negotiation between the bank and the business, and they count as an effective loan to the business
What is Overdrafts
400
1) It may have insufficient funds to purchase stock. Without stock, the business will be unable to generate sales revenue. 2) The business may become unpopular with its suppliers, canceling credit facilities. 3) The business will lose discounts associated with bulk buying or early payment. 4) Persistent failure to effectively manage working capital could cause the business to reach insolvency. A business is considered to be INSOLVENT when it can’t pay its bills as and when they fall due.
What is Low Working Capital
400
the process whereby a financial institution will purchase accounts receivable from businesses
What is Factoring
400
Working capital is not tied up while the business waits for its credit customers to pay.
What is Factoring
500
Discount on the invoice value for paying early
What is Invoice Discounting
500
the business sells the asset to a third party and then leases it back immediately. The effect of this on the business is to immediately increase working capital by increasing cash
What is Sale and Lease Back