MGTA05H3 Lecture Notes - Lecture 5: Accounts Payable, Cash Flow, Trade Credit
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MGTA05H3 Full Course Notes
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Failure to keep money will lead to bankruptcy. Example, purchase equipment, land and buildings that will be used in production. Timing of inflows/outflows of funds is not coordinated. The need to have money available when it is needed. Buy materials, pay for labour and produce items for sale, collections of revenue from sales come at the end of the process. Business wants to have more production capacity, new warehouse or sales office, new. These assets are expensive, and the business cannot always save to pay for them. A firm incurs short term expenditure regularly in its everyday business activities. Financial managers must pay attention to the working capital such as accounts payable and receivable and inventory. Trade credit letting your suppliers finance the business by paying later. Secured short term loans the bank gives you money to buy inventory and deal with accounts receivable. Factoring of accounts selling accounts receivable to someone else for cash.
