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Cash Cash Cash$

Transcript: Money and Credit Characteristics of Currency Every country in the world has an official form of currency. The word currency is another term for coins and paper money. Whatever it is called, all currencies share at least three common features: 1. Currency must be easy to carry. It must be small and light so people can carry it with them for everyday use. 2. Currency must be durable, or last a long time. It should not wear out too quickly or fall apart. 3. Currency must be made in a standard form and must be considered legal ten- der by the government that issues it. In this way, people can be certain that their coins and bills will be accepted in exchange for goods and services. Checks and Debit Cards Checks and Debit Cards Caching Checks Checks are just pieces of paper. They are not legal tender because they are not issued or guaranteed by the federal government. To write a check for a purchase, you must have a particular kind of bank account—usually called a checking account—and enough money in that account to cover the check. Girls best friend Debit Cards Today more and more people prefer to make payments from their checking accounts with debit cards instead of writing checks. Debit cards are like electronic checks. Instead of writing out a check in the store, you can give the cashier your debit card. The money will be deducted from your account just like with a check. Debit cards offer an increasingly popular alternative to carrying cash or a checkbook. Credit and the Economy Credits and the Economy Sometimes I come to your roommate wanted to make a purchase but does not have enough cash in his or her wallet or bank account. When this happens that person needs access to credit. Buying something on credit means that a person is able to buy something now with the promise to pay for it later. Credit is a loan of money that is repaid plus interest. Interest is a payment charged for borrowed money. Charge and Credit Cards Charge and Credit Cards some stores issued charge cards too many of their customers. A charge card is a form of borrowing. Customers can buy items without paying for them immediately because the store lends them the money for the purchase. The amount of the purchase is added to the customer's account balance and build to the customer each month. The customer then sent the store appointment for some or all of the amount due. A minimum payment is typically required. Usually there is no interest charged in if the customer pays the full balance by the due date. if the customer only pays part of the bands, the store usually charges interest on the remaining amount. $ and the Family Credit and the Family If used wisely, credit can help the average American family. few young families have saved enough money to acquire a house. Yet borrowing from a bank or mortgage company to do so will give them the extra money they need. They can then pay the loan of gradually from money they earn. Of course, they also have to pay interest on the loan, often for 30 years. Loans payable over long periods are called long-term credit. most American families used long-term credit to buy cars other families use it for buying major appliances and furniture. If a family plans to pay for an item within just a few weeks or months, it needs only short-term credit. This type of credit can be especially helpful for emergency purchases, so just a new furnace or refrigerator to replace the one that broke. the business often use credit rather than currency in most cells involving large amounts of goods. Credit helps merchants by allowing them to buy more goods at one time, which means they have more merchandise to sell to their customers. imagine that you are the owner of a snowboard shop and you need to stop 50 snowboards for the next season. If the board cost you $200 each, then you would need $10, 000 to pay for the shipment. but you may not have the money until you can sell all the boards. The snowboard manufacturer may agree to the lover the boards on credit, allowing you some. Of time to pay for the boards. Alternatively, you may arrange to borrow the money from a bank to pay for this shipment. Then you would repay the bank as the boards are sold. Business Credit and the Economy

Cash Conversion Cycle

Transcript: Cash Conversion Cycle Definition Definition: The Cash Conversion Cycle (CCC) is an important business metric that indicates the average number of days it takes to purchase inventory, and then convert it into cash. Days Inventory Outstanding Days inventory outstanding (dio) Days inventory outstanding is the average time to convert inventory into finished goods and sell them. DIO= (Average Inventory / Cost of Goods Sold) x 365 days Days sales outstanding days sales outstanding (dso) The average amount of time in days that your accounts receivable are waiting to be collected. DSO= (Accounts Receivable / Net Credit Sales) x 365 days Days payable outstanding Days payable outstanding (dpo) The average length of time it takes a company to purchase from its suppliers on accounts payable and pay for them. DSP= Accounts Payable / (Cost of Goods Sold / 365) CCC Equation and interpretation CCC Equation Cash Conversion Cycle (CCC) = DIO + DSO - DPO If done every year, a business can use the CCC to compare it's current performance to past performances. It can also be compared to other companies in the same industry. Faster inventory to sales processes have a lower CCC which is desirable to a higher CCC. The CCC is also a way to asses how efficiently working capital is being managed. Resources Resources https://corporatefinanceinstitute.com/resources/knowledge/accounting/cash-conversion-cycle/ https://www.thebalancesmb.com/calculate-cash-conversion-cycle-393115

Cash Conversion Cycle

Transcript: understand the options understand the risks Delivery cycle Options... Worst Case Don't know how much needed from bank Sales forecasts not secure key projects on hold Look at each area with others from your team Be open minded and listen (to both staff & customers) Agree on 2-3 possibilities per area& work out an action plan for each Develop 3 scenarios for each - best case, worst case & reality Once you have a plan, review your forecasts in light of these changes Communicate to your team, customers and... Be proactive with your bank manager! Sales Cycle Actions: Best Case Bill & Payment Cycle Bill & payment cycle Production/Inventory Cycle How does this affect your business? Cash to grow your business cash to pay your staff cash to pay your debtors cash to pay the bank interest Cash Conversion Cycle How could you reduce your production/inventory time by 20%? Could you procure some parts pre-assembled? Could you source your inventory from alternate suppliers? Could you change to 2 x shifts? What could you actually do to shorten this time? Scenario Planning Cashflow... Once again, time to think outside the box What other means could you use to reduce your delivery time to your customers? Could you use alternate transport? Could you print/produce closer to your market? Could you use technology to deliver your product or service? Scenario planning cash conversion cycle Middle of the Road Sales Cycle Delivery Cycle Time to get clever and look at both bills & payments How can you encourage your clients to pay sooner? Could you get a part payment up front & rest on delivery? Can you push your payments out to 45-60 days without any cost? Do you have someone who is measured on debtors days & cashflow? Production cycle The time it takes for $1 of operational and COG expense to return to you as cash collected from your customer! How long does it take from enquiry to closing the deal? Could you package it differently? Could you review how many steps & reduce these by 30%? How can you shorten this time? Current challenges

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