TECH 330 Week 3 Discussion | Assignment Help | Excelsior College
M3D1: Cash Flow and Profitability
Before you begin
this discussion, please download the Module 3 - Excelsheet
Economic entities are assumed to act
rationally in their self-interest. Therefore, consumers seek low prices and
best values. Investors seek high returns. Employees seek high incomes given a
specific level of training and work. Business seeks high revenues and low
expenses. Note that none of these entities are always successful in optimally
satisfying their self-interests. Still, all strive to acquire the best
information possible within the limits of information, and then make the best
decisions possible at the time.
In this discussion, we will
investigate why sometimes profitability is limited by cash flow.
This discussion will address the
following Module Outcomes:
MO1: Use different present worth techniques to evaluate and select from
project alternatives. (CO1, CO2)
MO2: Use different annual worth techniques to evaluate and select
from project alternatives. (CO1, CO2)
participating in the discussions, review The School of Business and Technology
Businesses form to take advantage of
profitable opportunities. New projects or systems are implemented in existing
businesses in order to increase profitability. With the tools from this module,
you are exploring how to value these profitable opportunities using present
value techniques and annual techniques of analysis. Even with profitability on
the horizon, many businesses still fail. These failures are explained away as
simply poor management, but often we hear of cash flow issues. What we find are
businesses, particularly new businesses, with opportunities for profitable
growth where their access to cash may be limited even when they are profitable.
A new company may find itself
profitable but “cash poor” for the following two reasons:
payables but delayed receipts.
2) Increasingly larger orders or perhaps one significantly large order.
In the first case a company may be
making profitable sales, but the receipts for those sales might not be coming
in on time to meet or pay for expenses. Payroll expenses are immediate. Loan
payments are on a schedule and must be made on time. A new company is still
generally forming its relationship with suppliers and strives to make those
On the other hand, a growing new firm
might find that its new customers make their payments, but they are often
delayed. In fact, the new company may make sales expecting payment in 30, 60,
or even 90 days and include that in a sales contract. Thus, the cash coming in
is delayed enough that even though the company appears profitable, it does not
have the cash to pay its immediate debts. In the second case, a company may
find itself with a very profitable, but unusually large order and may not have
the cash, supplies, or facilities to meet the order on time.
In this discussion, you are to:
Further analyze (speculate or anticipate) what might lead to each of
Discuss if these situations are limited to only new companies.
Come up with ideas that could possibly overcome these two cash flow
As an engineer, come up with ideas to help management in these
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