This blog is used to set lesson engagement activities (bell work) for Mr Clarke's business studies students.
Wednesday 2 March 2011
11D BIG Question
If a business has a period of negative cashflow (more money going out than coming in) does this necessarily mean the business is perfoming badly? What can businesses do to prepare for times of negative cash flow?
liam; this may not mean that the business is performing badly but that there is not much demand for a that business's products. a business can prepare for times of negative cash flow by saving money to cover costs.
To me this would suggest that the business is peforming badly, however they may have invested this money to create more in the long term. Business can create backup funds that can be used in times of trouble.. .. ..
Create a reserve tank of money so that when the business is spending like in the example they could have a reserve some money when they first start up so that going bankrupt is not an option.
Sophie Turner - It does not necessarily mean that the business is doing badly because they may have money going into the expansion of the company. To prepare for this a business could prepare a promotional campaign to get people interested in the business and they could also set up special offers to increase sales.
it dosen't mean the business is doing badly because they might not have reached break even point or they have very high costs. Businesses can prepare by trying to decrease thier costs, save as much profit as they can and advertise more
It depends on the time that the business has been in production for. At the early stages, intorduction phase, the company will be spending a lot of money on setting up the business, buying machinary, advertising the product as well. They have a lot of money going out, but very little revenue comming in as the product and company is not well known.
it doesnt mean that the business is performing badly because they could be spending a lot of money for there sales to work, at this time the business could get cheaper advertisment.
If they are expanding then they will have to spend lots more money on new premises, stock and staff which means they will have a negative cashflow as sales won't increase while they are spending all this money.
No it doesn't as it could mean there is low demand for that product at that time or the economy is bad. They could prepare for times of negative cashflow by making sure they have an overdraft they could use or set aside some money from months they are making profits for when they do have negative cash flow.
hollie b; no, not necessairly because it could just be a low demand for that product at that particular time. to prepare for these time they can then make sure they have an overdraft to use so they havesome money aside :)
This may be happening because the company is spending more money than they usually would by developing new products or expanding the company. It could also be caused by the season, for example people are less likely to spend large amounts of money in january as it is after christmas or in october which is after the half term, this is because they spend more money during these periods. They could prepare for this by keeping a certain amount of money to one side from busier months as a reserve.
If the business is in a period of negative cashflow, the business is not always performing badly because it may be spending money on other things that will lead to an increased or more stable cash flow in the future, for example expanding. Also it is not always the business' fault such as if there is a low demand for the product or the entire economy is performing badly or business taxes have increased.
it doesnt necessarily mean they are performing badly, they are just buying more than they are selling and they it can also depend on what stage they are at, they could be advertising. to prepere for this you can store goods to sell so that you dont have to buy anymore !
Holly Lawson says: If a business has a period of negative cashflow it does not necessarily mean that the business is performing badly because: - The business might be expanding and will therefore be spending more money - If the economy is in a recesssion then all businesses will find it hard To prepare for times of negative cash flow they could: -Cut back in other areas -Have a promotional offer -Have money reserved for times like this
If money going out is more than coming in this does not mean that the business is performing badly as what the money is spent on could late create more profit the only thing is that you need to prepare for this amount of money this could be by sacrificing something so you have enough for the thing you want.
there may be certain times of the year that a business will have negative cashflow, this could be the run up to christmas time for example. the business could be paying out more money for things such as advertising in order to make consumers think that this is what they want to buy people for christmas. in this case, negative cashflow may not be a bad thing because if lots of consumers invest in the product then the business will be making more money eventually.
No, they could be in the middle of an expensive advertising campaign or may just be starting out (not enough awarenes yet). They can save money while in positive cash flow or run as efficiently as possible to minimise debt when they eventually get into negative cash flow. A loan is another option.
No it doesn't mean they are performing badly, it could mean they are only just starting and therefore paying money out for research and advertising, resulting in a negative cash flow. In preparation businesses can create funds that can be used when needed.
Tyánni: If a business has negative cashflow, this doesn't mean that they are performing badly. It just means that the demand for the business' service or product is not great. They could preapare for negative cashflow by saving money/cutting outgoing costs as much as possible. Or have a plan such as special offers/sales or limited changes for more demand/interest.
liam;
ReplyDeletethis may not mean that the business is performing badly but that there is not much demand for a that business's products. a business can prepare for times of negative cash flow by saving money to cover costs.
Tim Taylor - My wonderful answer
ReplyDeleteTo me this would suggest that the business is peforming badly, however they may have invested this money to create more in the long term. Business can create backup funds that can be used in times of trouble.. .. ..
Create a reserve tank of money so that when the business is spending like in the example they could have a reserve some money when they first start up so that going bankrupt is not an option.
ReplyDeleteTom Common
Sophie Turner - It does not necessarily mean that the business is doing badly because they may have money going into the expansion of the company.
ReplyDeleteTo prepare for this a business could prepare a promotional campaign to get people interested in the business and they could also set up special offers to increase sales.
it dosen't mean the business is doing badly because they might not have reached break even point or they have very high costs. Businesses can prepare by trying to decrease thier costs, save as much profit as they can and advertise more
ReplyDeleteGianni
It depends on the time that the business has been in production for. At the early stages, intorduction phase, the company will be spending a lot of money on setting up the business, buying machinary, advertising the product as well. They have a lot of money going out, but very little revenue comming in as the product and company is not well known.
ReplyDeleteNick Roper
it doesnt mean that the business is performing badly because they could be spending a lot of money for there sales to work, at this time the business could get cheaper advertisment.
ReplyDeleteDan gold
If they are expanding then they will have to spend lots more money on new premises, stock and staff which means they will have a negative cashflow as sales won't increase while they are spending all this money.
ReplyDeleteChris
Ollie Manser says
ReplyDeleteNo because it could be a time of recession or tough economic times, therefore people have less money to spend.
Natasha Ewart-Jones
ReplyDeleteNo it doesn't as it could mean there is low demand for that product at that time or the economy is bad. They could prepare for times of negative cashflow by making sure they have an overdraft they could use or set aside some money from months they are making profits for when they do have negative cash flow.
hollie b; no, not necessairly because it could just be a low demand for that product at that particular time. to prepare for these time they can then make sure they have an overdraft to use so they havesome money aside :)
ReplyDeleteThis may be happening because the company is spending more money than they usually would by developing new products or expanding the company. It could also be caused by the season, for example people are less likely to spend large amounts of money in january as it is after christmas or in october which is after the half term, this is because they spend more money during these periods. They could prepare for this by keeping a certain amount of money to one side from busier months as a reserve.
ReplyDeletetbh, i dont have a clue.
charlie cooper :)
If the business is in a period of negative cashflow, the business is not always performing badly because it may be spending money on other things that will lead to an increased or more stable cash flow in the future, for example expanding.
ReplyDeleteAlso it is not always the business' fault such as if there is a low demand for the product or the entire economy is performing badly or business taxes have increased.
Anthony Bench
it doesnt necessarily mean they are performing badly, they are just buying more than they are selling and they it can also depend on what stage they are at, they could be advertising. to prepere for this you can store goods to sell so that you dont have to buy anymore !
ReplyDeleteDan.
Holly Lawson says:
ReplyDeleteIf a business has a period of negative cashflow it does not necessarily mean that the business is performing badly because:
- The business might be expanding and will therefore be spending more money
- If the economy is in a recesssion then all businesses will find it hard
To prepare for times of negative cash flow they could:
-Cut back in other areas
-Have a promotional offer
-Have money reserved for times like this
Charlotte Mills:
ReplyDeleteIf money going out is more than coming in this does not mean that the business is performing badly as what the money is spent on could late create more profit the only thing is that you need to prepare for this amount of money this could be by sacrificing something so you have enough for the thing you want.
there may be certain times of the year that a business will have negative cashflow, this could be the run up to christmas time for example. the business could be paying out more money for things such as advertising in order to make consumers think that this is what they want to buy people for christmas. in this case, negative cashflow may not be a bad thing because if lots of consumers invest in the product then the business will be making more money eventually.
ReplyDeleteizzi gray
No, they could be in the middle of an expensive advertising campaign or may just be starting out (not enough awarenes yet). They can save money while in positive cash flow or run as efficiently as possible to minimise debt when they eventually get into negative cash flow. A loan is another option.
ReplyDeleteNo it doesn't mean they are performing badly, it could mean they are only just starting and therefore paying money out for research and advertising, resulting in a negative cash flow. In preparation businesses can create funds that can be used when needed.
ReplyDeleteMatt Fullerrrrrrrrrrrrr
Tyánni:
ReplyDeleteIf a business has negative cashflow, this doesn't mean that they are performing badly. It just means that the demand for the business' service or product is not great. They could preapare for negative cashflow by saving money/cutting outgoing costs as much as possible. Or have a plan such as special offers/sales or limited changes for more demand/interest.