MGCR 211 Chapter Notes - Chapter 5: Cash Conversion Cycle, Cash Flow, Accrual

• School: McGill University
• Department: Management Core
• Course: MGCR 211
• Professor: Erica Pimentel

Document Summary

** because a company cannot operate w/out cash, it makes sense that we need a statement of cash flows. Cash flow problems in companies: 3 fundamental causes. But obviously not the best answer b/c it reduces net earnings and may hurt the company in the long run. Significant lead/lag relationships in cash inflows and outflows. Reduce lead/lag relationship reduce the length of the company"s cash conversion cycle get customers to pay cash or to not pay in 30days, maybe. Inadequate financing or undercapitalization (in this context refers to the cash the company begins with) > get it through equity financing and to borrow the cash. Cash sitting in a chequing account typically earns little to no interest proper cash management would be investing that cash into something else. Must consider cash and cash equivalents cash position: short-term, highly liquid investments that can readily be converted into known amounts of cash.