Mary Margaret Glenn knew the going would be tough the first couple of years. She
ID: 449889 • Letter: M
Question
Mary Margaret Glenn knew the going would be tough the first couple of years. She was now finding out exactly how tough. After five years of working for others, Mary and her former college roommate had pooled their resources and purchased a small building not far from the college campus. In it, they served gourmet coffees and specialty pastries. Business was good, when ‘‘good’’ was defined as consistently increasing weekly sales levels and strong profit margins. Unfortunately, during the recently completed campus Spring Break, their sales volume fell significantly (about 80%). As Mary’s roommate pointed out, however, the expenses did not fall. Rent, insurance, utilities, and lease payments were just a few of the operation’s expenses that did not take a break during Spring Break. As a result, cash was tight. The operation would make its bi-weekly payroll, but not by much. Fortunately, the students had returned, and so had revenues. But it had been a narrow escape—too narrow, thought Mary.
What are some specific investment-related activities you could suggest to Mary to avoid a cash flow crisis the next time her business volume reduces dramatically?
Explanation / Answer
Cash flows have continuously been a point of concern for the lots of the small businesses. Nevertheless as a result of lower industry quantity and smaller revenue margins it has end up more fundamental. In an effort to avert a cash go with the flow difficulty the next suggestions are made.
• firstly any trade needs to stabilize itself earlier than it starts to protect and shield from the risks.
• preserving the preferred stages of liquidity to climate unexpected difficulty.
• perform a review of the business
• determine the right mix of attributes
• Managing the receivables
• assessment the money flows
• build on first-rate cash waft practices