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AIU Running out Of Cash Companys Catastrophic Consequences Discussion

AIU Running out Of Cash Companys Catastrophic Consequences Discussion


Assignment Details

Cash budgets are the most important tool for monitoring and controlling corporate cash. Without them, good cash management is simply impossible. Cash budgets are necessary in controlling cash in any organization.

Cash is king!

  • Describe what would happen to a company if it ran out of cash.
  • Explain the importance of good working capital management and the cash conversion cycle.

In your replies to others, share your experiences in a time when cash was tight in a business scenario and how it was dealt with.

Danielle Ross

Management of cash in a business is important; if a company mismanages their cash, the company could go bankrupt. Having a budget ensures that there is a cash allocation to everyday operations as well as advancement opportunities. Improper cash management in a business can lead to stymied growth. Without proper cash flow and management, a business can miss out on net investment opportunities. Cash is needed to ensure wages for the business’s employees and essential supplies. Stymied growth looks bad in the company and has a negative effect on employee moral. It would be hard to retain employees or hire new ones it the company cannot manage their finances. If business runs out of cash it has an affect on relationships with those employed there; jobs could be lost and company reputation could be damaged. This damaged reputation also affects future business and marketing.

I worked with a friend for a while doing cleanings; she struggles to manages her finances and was unable to pay me for the work I performed on a few occasions. I’m this situation, I felt the need to stop helping her if she could not afford to pay. She lost future work because she couldn’t manage the flow of cash from her cleaning business.

It is important to understand the importance of good capital management in a business . It is important to know and keep up todays on all current assists and liabilities. Knowing this information helps show what cash resources are available for projects and future investments. A business cash conversion cycle involves a background check and an evaluation of current financial situation and credit. The corporate cash conversion cycle goes through receipts and collection records to get an accurate picture of the cash flow. Understanding what is available and how payments can be recouped is important in capital management. Business needs cash to continue the cycle of revenue within the company; cash is needed for making alliances and daily expense and commercial investments. 

Isaiah Fuller

Considering cash management is very important for controlling the unnecessary cash related activities and availability of cash at the time of need. If a company was to run out of cash there would be so many negative impacts on the business and I am going to label and list a couple of these to give great insight! If the proper management of cash is not done then there is high possibility for the business, that if it runs out of cash and giving the timely dividend to shareholders is not possible so the business wouldn’t be able to pay the dividend. Another thing is as cash budgets are done for the purpose of adequate cash supply to each activity, if it is not done properly then raw materials are not available to the workers on time! Which is then directly impacting the operating activities of the business. Payments of staff members becomes late with an improper supply of cash in the business. Good working capital management is necessary for the company as the main aim of working capital management is to improve the operating activities. All problems which are discussed above can also be solved by improving the working capital management. With good working capital management, this will help to increase the earnings and profitability of the business. Also cash conversion cycles has the same goal and aim to smooth the operational activities of business by doing management of it’s resources so that maximum utilization of the resources can be oerformed! I also learned that when the cash conversion cycle is shorter then selling the inventories become better with less chances of becoming bad debts! 

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