MODULE 1

Scope and Role of Financial Management

Objectives:
After this module, the students should be able to:
a. Describe the scope and role of finance.
b. Explain the language and decision making of finance.
c. Define the responsibilities of financial managers as well as the financial
and operating environment in which financial managers operate.
d. Identify the relationship between accounting and finance.
e. Compare the corporate form of business organization.

The Firm & The Financial Manager Accounting & Finance

Business – users of productive resources, seek a profit by providing
products or services that satisfy the needs and wants of society.
Firm– a business that which has been organized for commercial
purposes.
Business Firm – a profit-seeking that serves as the main link between
scarce resources and customer satisfaction.
- essential about developing aid, marketing a new product or
service, organizing the capital and workforce and taking the risk
with a new market.

Primary Goals of Business

• To earn profit
• To increase its own value as an economic entity
• To improve the quality of life in the community
•
Finance – the “art & science of managing the financial resources of a
business”.
-allocation of financial resources
-procurement of funds
-efficient & effective utilization of financial resources

Accounting & Finance

• BUSINESS RECORDS
• ACCOUNTING PRACTICES
• FINANCIAL REPORTS
• CASH FLOW MGMT
ACCOUNTING PRACTICES
Auditing
It is an independent examination that ensure the fairness and reliability
of the reports that management submits to users outside the business entity.
An external auditor is an independent contractor hired by the company to
perform auditing or attest function.

Internal Auditing
Examination of the information system, records, and operations of the
entity to ensure the effectiveness and efficiency of the operations and
integrity of records.

Cost Accounting
The tracking of costs, income and profits related to specific jobs as well
as reports that tabulate and examine costs, and compare actual with
budgeted amounts. It also deals with the collection, allocation and
control of the cost of producing specific goods and services.

Financial Accounting
Focuses on the recording of business transactions and the periodic
preparation of reports on financial position and results of operations.

Management Consulting
Includes advice on mergers and takeovers, installation or modification
of accounting systems, financial planning models, inventory control
systems and advice re: budgeting, forecasting and general planning.

Basic Compliance Accounting

Compliance accounting is the process of preparing accounting reports,
tax returns or financial statements that adhere to standards set forth by
a governmental agency or an industry regulatory body.

Accounting Education
Many CPAs are professors of accounting in various colleges and
universities.

Forensic Accounting
Forensic accounting utilizes accounting to investigate and recreate
business conditions for valuation. Most common use is in divorce or
insurance recovery.
 RECORDKEEPING — WHY IT’S NECESSARY
• Accurate and complete records enable you to identify all your business
assets, liabilities, income and expenses. That information, when
compared to appropriate industry averages, helps you pinpoint both the
strong and weak phases of your business operations.
• Good records are essential for the preparation of current financial
statements, such as the income statement (profit and loss) and cash-
flow projection. They also present a complete picture of your total
business operation, which will benefit you as well.
• Good records are critical at tax time. Poor records could cause you to
underpay or overpay your taxes. In addition, good records are essential
during tax examination, if you hope to answer questions accurately and
to the satisfaction of the BIR.

THE BASIC RECORDKEEPING SYSTEM

• A basic journal to record transactions (receipts, disbursements, sales,
purchases, etc.)
• Accounts receivable records
• Accounts payable records
• Payroll records
• Petty cash records
• Inventory records

Accounting Cycle

1. Journalize in:
General Journal
Cash Receipts Journal
Cash Disbursement Journal
Sales Journal
Purchases Journal

2. Post to: Ledgers

3. Prepare: Trial Balance

4. Complete: Ten-column worksheet

5. Prepare and post: Adjusting Entries

6. Prepare:
 Income Statement & Balance Sheet

7. Prepare and post: Closing Entries

8. Prepare: Post-closing Trial Balance

ACCOUNTING RECORDS
• Sales journal
This records the value of each sales invoice and from this information
the owner of the business is able to analyze the sales by product or by
territory etc. The totals of this journal are posted or transferred to the
appropriate accounts in the general ledger.

• Purchases journal
This journal records the amount of each supplier’s invoice or monthly
statement and once again the expenditure is broken up into the various
types. The totals are posted to the appropriate accounts in the general
ledger while the details of the suppliers are posted to the supplier’s
accounts in the creditor’s ledger.

• Cash receipt book

This book records all income received in cash. It is usually broken up
into columns to show the various types of income that have been banked
into the bank account. Although it is called a cash book, it is in fact the
book in which you record all your business transactions, whether they are
by cash, cheque or credit card.
Entries on the receipt side of the cash book are recorded from your
receipts, invoices, or bank deposit book, each individual receipt recorded
separately and the total is entered in the bank column when the receipts
are banked.

• Cash payment book

This book records all outgoing cash. There are a number of columns
into which each payment is analyzed to show the type of expenditure.
Entries for the payments section of your cash book are obtained from credit
card pockets and the cheque butts from your cheque book. The cheque
butts should be entered into the payments book in the order in which you
wrote them out. Make sure that, at the very least, a receipt or a tax invoice
or statement is obtained for any payment you make.

• General journal
This journal is used to record all other transactions other than those that
are recorded in the sales journal and purchases journal and cash book,
 cash receipts and cash payments book. It also records non-cash
transactions, such as depreciation, not shown in the other journals.

• General ledger
This ledger is a summary of all the transactions contained in all the
books of prime entry (that is, the sales journal, purchases journal, cash
receipts book, cash payments book and general journal).
The general ledger is normally shown in segments for assets, liabilities,
income and expenses as shown in the diagram. After all the transactions
have been posted to this ledger a trial balance (which is a list of all the
balances of the accounts) is prepared. It is from this trial balance that we
are able to complete the Trading Account, Profit and Loss Account and
Balance Sheets of the business. State the desired objective. Use multiple
points if necessary.

• General journal
This journal is used to record all other transactions other than those that
are recorded in the sales journal and purchases journal and cash book,
cash receipts and cash payments book. It also records non-cash
transactions, such as depreciation, not shown in the other journals.

• General ledger
This ledger is a summary of all the transactions contained in all the
books of prime entry (that is, the sales journal, purchases journal, cash
receipts book, cash payments book and general journal).
The general ledger is normally shown in segments for assets, liabilities,
income and expenses as shown in the diagram. After all the transactions
have been posted to this ledger a trial balance (which is a list of all the
balances of the accounts) is prepared. It is from this trial balance that we
are able to complete the Trading Account, Profit and Loss Account and
Balance Sheets of the business. State the desired objective. Use multiple
points if necessary.

NEW GOVERNMENT ACCOUNTING SYSTEM ANNEXES

[NGAS Forms - ]
• General Journal (GJ)
• Cash Receipts Journal (CRJ)
• Check Disbursements Journal (CkDJ)
• Cash Disbursements Journal (CDJ)
• General Ledger (GL)
• Subsidiary Ledger (SL)
• Supplies Ledger Card (SLC)
 • Work, Other Animals and Breeding Stocks Ledger Card (WOABSLC)
Property, Plant and Equipment Ledger Card (PPELC)
Investment Ledger Card (ILC)
• Real Property Ledger Card (RPLC)
• Construction in Progress Ledger Card (CIPLC)
Registry of Appropriations, Allotments and Obligations - Capital Outlay
(RAAOCO)
• Registry of Appropriations, Allotments and Obligations - Maintenance
and Other Operating Expenses (RAAOMO)
Registry of Appropriations, Allotments and Obligations - Personal
Services (RAAOPS)
• Registry of Appropriations, Allotments and Obligations - Financial
Expenses (RAAOFE)
• Registry of Public Infrastructures (RPI)
• Registry of Reforestation Project (RRP)
• Cashbook - Cash in Treasury (CB-CT)
• Cashbook - Cash in Bank (CB - CB)
• Cashbook - Cash Advances (CB - CA)
• Journal Entry Voucher (JEV)
• Disbursement Voucher (DV)
• Petty Cash Voucher (PCV)

FINANCIAL STATEMENTS
Financial Statements are prepared and presented for external users by
many countries around the world. Although such financial statements may
appear similar from country to country, there are differences which have
probably been caused by a variety of social, economic and legal
circumstances and by different countries having in mind the needs of different
users of FS when setting national requirements.

USERS of Accounting Information

• Owners & Prospective Owners
• Creditors
• Customers
• Government
• Tax Services
• Investors
• Employees & Labor Unions
• Public
FINANCIAL STATEMENTS
Financial statements are a structured representation of the financial
position and financial performance of an entity.
A complete set of financial statements comprises:
a. a statement of financial position (balance sheet);
b. an income statement;
c. a statement of changes in equity
d. a cash flow statement; and
e. notes, comprising a summary of significant accounting
policies and other explanatory notes.

b. A Statement of Financial Position (BALANCE SHEET)

A balance sheet describes the resources that are under a company's
control on a specified date and indicates where these resources have come
from. It consists of three major sections: (1) the assets: valuable rights owned
by the company; (2) the liabilities: the funds that have been provided by
outside lenders and other creditors in exchange for the company's promise to
make payments or to provide services in the future; and (3) the
owners‘/stockholders’ equity: the funds that have been provided by the
company's owners on their behalf.

GOVERNMENT SERVICE INSURANCE SYSTEM

GENERAL INSURANCE FUND
B A L A N C E S H E E T (Unaudited)
December 31, 2018 and 2019

Increase (Decrease)

201
ASSETS 2018 Amount Percentage
9
P P
Cash on Hands and in P
1,186,414,88 1,453,266,69 -18.360%
Banks (266,851,812)
2 4
Contribution and
426,537,780 716,988,054 (290,450,274) -40.51%
Premium Receivables
Due from Reinsurers
835,889,553 648,975,529 186,914,023 28.80%
& Crediting Cos.
Other Receivables 622,707,121 586,529,513 36,177,607 6.17%
(net)
5,843,388,96 5,319,424,41
Investments 523,964,550 9.85%
9 9
6,306,550,53 6,306,550,53
Acquired Assets 0 0.00%
6 6
Other Assets 54,436,740 54,436,740 0 0.00%
P P
Total Assets 15,275,925,5 15,086,171,4 P 189,754,095 1.26%
84 89

Liabilities & Net Worth

P
Sundry Accounts
P 243,372,574 P 88,954,126 154,418,44 173.59%
Payable
7
Funds Held in Trust 18,301,523 16,584,102 1,717,420 10.36%
Claims and Benefits
610,549,375 617,805,329 (7,255,953) -1.17%
Payable
Provision for Unadjusted (307,981,17
64,177,496 372,158,672 -82.76%
Claims 5)
Catastrophe Loss
118,617,379 99,282,349 19,335,029 19.47%
Reserve
1,256,293,090 163,154,01
Due to Reinsurers 1,093,139,080 14.93%
) 0
(111,681,30
Deferred Credits 930,847,897 1,042,529,207 -10.71%
9)
P P (88,293,530
Total Liabilities -2.65%
3,242,159,337 3,330,452,868 )
Net worth
P P P
Reserve for Losses 1.50%
1,996,406,066 1,966,902,528 29,503,538
Reserve for
3,964,090,516 3,906,863,070 57,227,446 1.46%
Contingencies
 191,316,64
Retained Earnings 6,073,269,665 5,881,953,022 3.25%
2
P P
P
Total Net worth 12,033,766,24 287,047,62 2.37%
11,755,718,620
7 6
P P
Total Liabilities and P
15,275,925,58 189,754,09 1.26%
Net worth 15,086,171,489
4 5

INCOME STATEMENT
The company uses its assets to produce goods and services. Its
success depends on whether it is wise or lucky in the assets it chooses to hold
and in the ways it uses these assets to produce goods and services. The
company's success is measured by the amount of profit it earns—that is, the
growth or decline in its stock of assets from all sources other than
contributions or withdrawals of funds by owners and creditors. Net income is
the accountant's term for the amount of profit that is reported for a particular
time period.

GOVERNMENT SERVICE INSURANCE SYSTEM

GENERAL INSURANCE FUND
STATEMENTS OF REVENUES AND EXPENSES (Unaudited)
December 31, 2019 and 2018
Increase (Decrease)

2019 2018 Amount Percentage

3,793,883,13 (452,379,98
Premium, net of returns 4,246,263,123 -10.65%
8 5)
1,360,952,85 (365,019,41
Reinsurance Premiums 1,725,972,268 -21.15%
4 4)
2,432,930,28
Premium Retained 2,520,290,854 (87,360,571) -3.47%
3
Decrease (Increase) in
Reserve for (150,682,147) (382,220,440) 231,538,293 -60.58%
Unearned Premiums
 2,282,248,13
Premiums Earned 2,138,070,414 144,177,721 6.74%
6
Commission Earned on
123,377,996 142,851,714 (19,473,718) -13.63%
Reinsurance
Interest on Funds Held in
29,583 18,877 10,706 56.71%
Trust

Gain on Foreign Exchange 22,892,557 63,706,112 (40,813,554) -64.07%

P
Gross Underwriting P P
2,428,548,27 3.58%
Income 2,344,647,119 83,901,154
4

Underwriting
Deductions:

P
Claims and Losses P 248,540,601 P 312,007,627 (63,467,02 -20.34%
5)
(42,694,82
Commission Expense 48,266,245 90,961,074 -46.94%
9)
Interest Expense on Fund
0.00
Held in Trust
Service Fee 52,226,531 54,992,482 (2,765,951) -5.03%
Excess of Loss Premium 561,067,949 494,922,556 66,145,392 13.36%
Recovery/Collection Fee 74,704 812,442 (737,738) -90.80%
Bad Debts Expense 70,228,577 74,020,509 (3,791,932) -5.12%
Provision for Catastrophe
19,335,029 22,527,407 (3,192,377) -14.17%
Losses
Extra Renumeration 50,105,841 20,491,156 29,614,685 144.52%
Loss on Fpreign
1,277,187 4,580,113 (3,302,926) -72.11%
Exchange
Other Insurance Expense 418,928 72,920 346,008 474.50%
Premium Discount 18,809,506 18,809,506 0.00%
 Total Underwriting P1, P1, P
-0.47%
Deductions 070,351,103 075,388,291 (5,037,188)
P P P
Net Underwriting Income 7.01%
1,358,197,171 1,269,258,827 88,938,343
Investment and other 176,947,80
958,206,018 781,258,209 22.65%
Income 8
P
P P
Total Income 265,886,15 12.97%
2,316,403,189 2,050,517,037
2

Less: GSIS Fees

P
Marketing Commission P 728,640,198 P 772,808,536 (44,168,33 -5.72%
8)
(14,055,49
Administration Fee 479,309,723 493,365,219 -2.93%
5)
P P 52,223,
Total GSIS Fees -4.60%
1,207,949,323 1,266,173,755 833
P
Net Income before P
P 784,343,281 324,109,98 41.32%
Increase in Reserves 1,108,453,268
6

Microsoft Corporation INCOME STATEMENT

(In millions, except earnings per share)

Three Months Year Ended

Ended June 30
June 30
2018 2019 2018 2019

Revenue $9,29 $10,161 $36,835 $39,788

2
Operating Expenses:
 Cost of revenue 1,481 1,410 6,716 6,200

Research and 1,659 1,691 7,779 6,184

development
Sales and marketing 2,409 2,770 8,309 8,677

General and 610 1,301 4,997 4,166

administrative
Total operating 6,159 7,172 27,801 25,227
expenses

Operating income 3,133 2,989 9,034 15,561

Three Months Year Ended

Ended June 30
June 30
2018 2019 2018 2019

Investment income and 571 872 3,162 2,067

others
Income before income taxes 3,704 3,861 12,19 16,628
6

Provision for income taxes 1,014 161 4,028 4,374

Net income 2,690 3,700 8,168 12,254

Earnings per share:

Basic $ 0.25 $ $ $ 1.13

0.34 0.76

Diluted $ 0.25 $ $ $ 1.12

0.34 0.765

Weighted average shares

outstanding: Basic
 Basic 10,806 10,75 1080 10803
0 3

Diluted 10,864 10,81 10, 10,906

9 894

• CASH FLOW STATEMENT

Information about the cash flow is useful in providing users with a basis
to assess the ability of the entity to utilize cash flows.

Cash flows result from three major groups of activities:

(1) operating activities,
(2) investing activities, and
(3) financing activities.

• Operations
Cash flows from operating activities are primarily derived from the
principal revenue-producing activities of the entity. Therefore, they generally
result from the transactions and other events that enter into the determination
of profit or loss.

Examples of cash flows from operating activities:

• Cash receipts from the sale of goods and rendering of services;

• Cash receipts from royalties, fees, commissions and other revenue;
• Cash payments to suppliers for goods and services;
• Cash payments to and on behalf of employees

Investing

Changes in equipment, assets or investments relate to cash from investing.

Usually cash changes from investing are a "cash out" item, because cash is
used to buy new equipment, buildings or short-term assets such as marketable
securities. However, when a company divests of an asset, the transaction is
considered "cash in" for calculating cash from investing.

Examples of cash flows from investing activities:

• Cash payments to acquire property, plant and equipment;
• Cash receipts from sales of PPE’s;
• Cash advances and loans made to other parties;
• Cash receipts from the repayment of advances and loans made to other
parties
• Cash payments to acquire property, plant and equipment;
• Cash receipts from sales of PPE’s;
• Cash advances and loans made to other parties;
 • Cash receipts from the repayment of advances and loans made to other
parties

Financing
Changes in debt, loans or dividends are accounted for in cash from
financing. Changes in cash from financing are "cash in" when capital is raised,
and they're "cash out" when dividends are paid. Thus, if a company issues a
bond to the public, the company receives cash financing; however, when
interest is paid to bondholders, the company is reducing its cash.

Examples of cash flows from financing activities:

• Cash proceeds from issuing shares or other equity instruments;
• Cash payments to owners to acquire or redeem the entity’s shares;
• Cash proceeds from issuing debentures, loans, notes, bonds,
mortgages and other short-term or long term borrowings;
• Cash repayments of amounts borrowed;

• Profit is not cash

 Remember that cash flow is not the same as net income. Cash flow
balances do not match the amount of net profit as shown in your profit and
loss accounts. This is because net profit includes non-cash items, such as
depreciation etc., but the cash flow is concerned only with items that are cash,
regardless of whether they are expenses or non-expenses.
In accounting, the profit is matched by taking income and deducting
expenses. But in accounting the cash transactions in the business are only
part of the whole equation. Accounting, which results in the calculation of the
net profit, is concerned with matching income with expenses. Cash flow is
concerned with matching cash coming in with cash going out. One is purely
cash while the other is not.

Bug Busters Exterminating Service

Comparative Balance Sheets

12/31/2018 12/31/2019

Cash $17,845 $4,375

Accounts Receivable 12,185 27,371

Inventory 6,034 9,133

Property and Equipment 83,239 83,239

Less: Accumulated
(44,826) (48,989)
Depreciation

Total Assets $74,477 $75,129

Accounts Payable $6,977 $7,630

Notes Payable (Bank

27,500 12,000
Loans)

Total Liabilities $34,477 $19,630

Stockholder's Equity $40,000 $55,499

Total Liabilities and $74,477 $75,129

Equity

Bug Busters Exterminating Service

Income Statement
December 31, 2019

Sales $267,189

Less: Cost of Goods Sold 132,122

Gross Profit $135,067

Less: Operating Expenses (115,405)

Less: Depreciation (4,163)

Net Profit $15,499

Net Profit

+ Depreciation

- Increases (or + Decreases) in Accounts Receivable

- Increases (or + Decreases) in Inventories

+ Increases (or - Decreases) in Accounts Payable

- Decreases (or + Increases) in Notes Payable (Bank Loans)

= Net Cash Flow

Adjustment Description Amount

 Net Profit--December 31, 2019 $15,499

Add: Depreciation 4,163

Increase in Accounts Receivable between

Subtract: (15,186)
12/31/18 and 12/31/2019

Increase in Inventory between 12/31/18

Subtract: (3,099)
and 12/31/2019

Increase in Accounts Payable between

Add: 653
12/31/18 and 12/31/2019

Decrease in Notes Payable between

Subtract: (15,500)
12/31/18 and 12/31/2019

Net cash flow for the year ended December 31, 2019 ($13,470)

Bug Busters' accrual net profit and the net cash flow for the year ended
December 31, 2019, report two entirely different results. The income statement
prepared using the accrual method of accounting reports a profit of $15,499 for
the year. However, in terms of a cash flow, Bug Busters had a negative cash
flow of $13,470 for the same year. In other words, Bug Busters spent $13,470
more than it collected during the year.

Cash Flow Budget

A cash flow budget is a projection of a business' cash inflows
and outflows over a certain period of time. A typical cash flow budget predicts
the anticipated cash receipts and disbursements of a business on a month-to-
month basis. However, a cash flow budget could predict the cash inflows and
outflows on a weekly or daily basis.
Because of the uncertainty involved in the cash flow budget,
trying to project too far into the future may prove to be less than worthwhile. At
the same time, a cash flow budget that doesn't look far enough into the future
will not predict future events early enough for you to take corrective action in
your cash flow.

The Cash Flow Cycle

Inflows. Inflows are the movement of money into your cash flow.
Projected Cash Inflows (Receipts):
• sales and receipts
• collections on accounts receivable
• loan proceeds
• other cash inflows

Outflows. Outflows are the movement of money out of your business.

Outflows are generally the result of paying expenses. If your business involves
reselling goods, then your largest outflow is most likely to be for the purchase
of retail inventory. A manufacturing business's largest outflows will mostly
likely be for the purchases of raw materials and other components needed for
the manufacturing of the final product. Purchasing fixed assets, paying back
loans, and paying accounts payable are also cash outflows.

Projected Cash Outflows

• The following are examples of some of the detailed cash outflows that
you may want to include when projecting your cash outflows for your
cash flow budget.
– Cost of goods sold
• inventory purchases
• shipping and handling
• manufacturing costs
– Operating expenses
• payroll
• payroll taxes
• advertising
• subscriptions and dues
• professional fees
• office and postage
• rent
• utilities
• insurance
• taxes and licenses
• supplies
• repairs and maintenance
• credit card fees
• bank service charges
• other operating expenses
 – One-time purchases
• new property or equipment
– Debt payments
• interest
– principal

Preparing a cash flow budget involves four steps:

1. preparing a sales forecast
2. projecting your anticipated cash inflows
3. projecting your anticipated cash outflows
4. putting the projections together
5.
1. Sales Forecast
Any financial plan must begin with a forecast of sales for the business.
The cash flow budget is no different — a sales forecast is the first step. Any
forecast will include some uncertainty. Your sales forecast probably won't
match your actual sales because of the many variables that ultimately
affect the final amount.
Factors considered in making a sales forecast:
• The company’s past sales volume
• Economic and political conditions
• Conditions in the industry to which the company belongs
• Competition
• Market research studies
• Pricing policies of the firm as well as those of the
competitors
• Government control & regulations
• The company’s own sales force, planned advertising and
promotional activities
• The company’s productive capacity and limitations
affecting production
• Change in demand for the product due to seasonal
variations.

Example:
• John Divot owns a golf supply retail store. John will use last year's sales
amounts to prepare his cash flow budget for the next six months. Here
is the sales information from the first six months of last year:

January$18,000
February$18,500
March$20,500
April$28,900
 May$32,300
June$36,600

• John expects sales for this year to be 1 percent higher in the off season
and 1.5 percent higher during the peak season; which begins in April.
John forecasts his sales for the first six months of this year to be as
follows:
January$18,180
February$18,685
March$20,705
April$29,333
May$32,785
June$37,150

2. Projecting Cash Inflows

Projecting cash receipts for your cash flow budget involves recognizing
the cash inflows from a sales forecast. If your business only accepts cash
sales, then your projected cash receipts will equal the amount of sales
predicted in the sales forecast.
Projecting cash receipts is a little more involved if your business
extends credit to its customers and deals with accounts receivable. If this is
the case, you must take into account the collection of accounts receivable and
the timing effect that collection has on the projection of your cash receipts.
Applying your accounts receivable collection pattern from the past to your
sales forecast is the best way to predict your cash receipts from the collection
of accounts receivable.

3. Projecting Cash Outflows

Projecting your cash outflows for your cash flow budget involves
projecting your expenses and other cash outflows over a certain period of
time. Projecting your expenses for the next month or six months may seem
like a difficult task. You may even feel like you're guessing when projecting
some of your business's expenses. After all, there are a number of different
variables that ultimately determine the amount of each expense.

4. Putting the Projections Together

The final step in preparing a cash flow budget is putting together your
projected cash inflows and outflows to come up with your cash flow bottom
line. In its basic form, the competed cash flow budget combines the following
information on a month-by-month basis:

Basic Form of the cash flow budget

Beginning Cash Balance
+ Projected Cash Inflows
- Projected Cash Outflows
= Your Cash Flow Bottom Line (the ending cash balance)
Cash Management involves having optimum neither excessive nor deficient
amount of cash on hand at the right time.

Objective: to invest excess cash to maximize returns while retaining sufficient

liquidity to satisfy operational and future needs.
Rationale for holding cash:
• Transaction balance (day-to day balance)
• Precautionary balance (for emergency disbursements)
• Speculative balance (to take advantage of business opportunities)
• Compensating Balance (required for retention by the bank)
• Make financial projections
• Create contingency plans
• Keep a lid on spending
• Keep inventory low
• Organize your billing schedule
• Stretch out your payables
• Take advantage of early payment incentives
• Balance your client base
• Check your pricing
• Don't buy all in one place
• Form a buying cooperative
• Renegotiate your insurance and supplier policies
• Tighten your inventory
• Consider leasing instead of buying