MGMT 1 Lecture Notes - Lecture 35: Merage Family, Cash Flow, Asset
Paul Merage School of Business
MGMT 1
Intro to Business Management
4 units
No Pre-reqs
Course code: 38001
tuesday/thursdays 9:30-10:50
Location:SB1 1200
Final: Thursday of finals week
Course Notes
❖ Operating Expenses – costs involved in operating a business, such as rent, utilities
and salaries.
■ Depreciation – the systematic write-off of the cost of a tangible asset over
its estimated useful life.
■ Can be classified as:
● Selling expenses – related to the marketing and distribution of the
firm’s goods & services – advertising, sales salaries, supplies, etc.
● General expenses – administrative expenses of the firm such as
office salaries, depreciation, insurance, and rent.
➢ Net Profit or Loss
■ Bottom line – the net income the firm incurred from revenue minus sales
returns, costs, expenses, and taxes over time.
❖ Statement of Cash Flows – reports cash receipts and cash disbursements related to three
major activities in a firm:
➢ Operations – cash transactions associated with running the business.
➢ Investments – cash used in or provided by the firm’s investment activities.
➢ Financing – cash raised by taking on new debt, or equity capital or cash used to
pay business expenses, past debts, or company dividends.
➢ Accounts analyze this to determine the firm’s next cash position – gives the firm
insight on how to handle cash better so that no cash flow problems occur.
➢ The Need for Cash Flow Analysis
■ If not properly managed, cash flow can cause a business much concern
■ It’s possible for a business to increase its sales and profits yet still suffer
cash flow problems.
■ Cash flow – the difference between cash coming in and cash going out of
a business.
■ Poor cash flow constitutes a major operating problem for many companies
and is particularly difficult for small and seasonal businesses.
■ How do these problems start:
● Goods bought on credit; if it sells large number of goods on credit,
then it needs more credit to pay immediate bills.
● If they reach their limit, it causes a severe cash flow problem.
