Shared Flashcard Set

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Final Exam
Lecture 5- Cash flow
17
Aerospace Engineering
1st Grade
02/26/2013

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Cards

Term
what complicates the cash flow model- 3
Definition
buy on credit
sell on credit
have expenses other than just invntory
Term
what 2 things help make sure that cash covers expense
Definition
increase gross margin
decrease expenses
Term
ways to improve cash flow-3
Definition
decrease cash investments
decrease chas outflow
increase cash inflow
Term
what ways can you control inventory to help wiht cash
Definition
control size
carry proper invenotry (quality)
Term
what is the 80/20 rule -2 ways to interpret
Definition
80% of problems come from 20% of inventory
20% of invenotry makes up 80% of sales
Term
Class A= -% of total sales/-% of inventory
Class B= -% of total sales/-% invt
Class C= -% of total sales/ -% of invt
Definition
80/20
15/20
5/60
Term
what is shrinkage
why does it affect cash inflow
Definition
loss of inventory to theft or breakage
have to use cash to buy it, but get no cahs income from it
Term
to improve gross margin you can-4
Definition
emphasize high-margin products
3rd party contracts
increase price
decrease cost
Term
to help with cash flow what do you do with idle cash
Definition
invest
Term
what investment is risk
which is not
Definition
stock piurchase
passbook saving account
Term
what is a liquid investment
Definition
quick conversion to cash
Term
to get a higher return= high/lower risk
Definition
hgiher
Term
if you are investing cahs that is needed later in the year- what kind of investment do you make?
Definition
liquid- bc you'll need that cahs quickly again
Term
how does crediting sales hinder cash flow-3
Definition
a credit= lots of investment of cash
slow cash inflo
outstanding debts become uncollectible
Term
what is opportunity cost
what is it equal to
Definition
when cash is tied up in acct recievable/ time btwn sale and payment
the cost of interest of an investment during that time
Term
how can you minimize opportunity cost (investment of cash in acct recievable)3-
Definition
-screen credit applicants
-sned out bill promtply
-add a charge to overrdue bills
Term
do you want to speed up or slow down account payable
Definition
slow down (reduce chas outflow)
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