Cash is the lifeblood of any business, especially a small business operation. Find out how to raise capital, understand cash flow, financing of fixed assets and regular operations via banking instruments. Finance covers the cash aspect of the small business operation.

Working Capital Management – Production and Sales Flow

There is no single management style to address the multitude of working capital cycles existing in the various business sectors and the underlying industries.   Taking raw resources and turning them into consumer goods has different time frames depending on the item produced.   In addition, the sales period varies from product to product.   …

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Working Capital Cycle

The college textbook definition of working capital is current assets minus payables and accrued expenses.  The term explains the dollar value of flexibility a business operation has to take advantage of immediate opportunities or endure sudden or long-term setbacks.  Since it is a balance sheet based formula the value is a function of a moment …

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Debt or Equity in Small Business – Fundamentals

Small business books and manuals explain the formula used to determine whether additional debt increases the return for investors commonly known as return on investment (ROI).   I find this laughable in our modern economic times given the low cost of financing.   For well qualified individuals, money can be borrowed at less than 6% …

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Working Capital Management – Fundamentals

Working capital management is a function of finance whereby management ensures adequate cash is available to meet operational needs over the typical working capital cycle.   The underlying elements of working capital management include 1) understanding the different forms of current assets and current liabilities and their corresponding cash cycles; 2) recognizing the relationships of production …

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Working Capital

Treasury Stock

Cash is the lifeblood of every business. Without cash a business operation can come to a standstill. Cash is one component of working capital, a term referring to current assets (Gross Working Capital) less payables and accrued expenses. The term is usually used in finance referring to the dollar value of flexibility management has to address expansion or …

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Cash Flows – Introduction

Insolvency is defined as the inability to pay liabilities as they come due. To meet the demand of creditors cash is required. For most small businesses there are as little as a single source to multiple sources of cash. Think about these two extreme examples: * Food Vendor  – an extremely small business with one primary source …

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Convertible Debt

Convertible Debt

In poker, deuces are often called the wild card.  You can use the card as a ‘Two’ or as any other card in the deck.  In effect, you can convert the card to something else.  Well, convertible debt uses the same principle in business.  The holder of the convertible instrument has a choice, continue to collect interest as a debt instrument or convert the debt to equity. 

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Recourse and Nonrecourse Types of Loans

When a lending institution loans money they mostly fear nonpayment of the debt.  Often these loans were implemented due to a third party’s endorsement.  To qualify the endorsement the bank may require the third party guarantee the debt.  This is known as having ‘Recourse’ in getting the debt paid.  When the third party is completely...

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