Why is cash called the lifeblood of any company?
What can we do to increase the cash flow of our company?
What controls are put in place by the best companies to maximize their cash flow?
Is it better to lease or to buy an asset in business?
1. Cash is called as lifeblood of any company
Yes, cash is termed as lifeblood of any company because every company or any business organisation will run based on availability of financial resources. Without financial resources no one can operate business activities.
Company may have many strategies for plans but to implement all those strategies in to operating activities of organisation company requires cash. Cash is required to meet short-term obligations and long-term obligations to run business smoothly.
2. Measures to increase the cash flow of company.
A. Reduce the credit period to the debtors
B. Increase short term financial resources from banks and institutional credit providers
C. Try to get raw materials for inputs on credit from the supplier.
D. Try to avoid short term investments and make good beneficial long term investments.
3. Major control adopted by best companies regarding cash flows are
A. Make cash to cash transactions with customers and avail credit from suppliers.
B. Avoid less beneficial short term investments and invest those all financial resources into operating activities of organisation or are beneficial long term investments
4. It is better to take assets on lease.
If we buy the asset, huge amount of cash flows will get blocked for a long time (till the end of useful life of asset)
If we lease the asset, we can make periodical payments which are very lesser compared to the value of asset. By taking asset on lease we can make part payments like installments, by this we can save interest of the amount.
So, taking asset on lease much better compared to buying the asset.
These are all the information required to solve the above given question.
I hope, all the above given information is useful and helpful to you.
Thank you.
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