Question

1. Why cash is king; and 2. How would you improve the cash position of a firm?

Your answer should contain 200-250 words.

Answer 1

The expression about the Cash being a king, narrates that Cash is the starting point of business, it is the cash that process of business and everything is converted in cash while closing the business. Thus, the cash is always in action when an organization runs a business. The cash is the most liquid asset which an organisation carries with it while dealing with any element of the world like purchase of machine, employing a worker, etc. If the organisation do not have support of cash then it could neither able to hire any resource. So, Cash comes at the first position in each and every field.

In other words, the cash is used in the form of Machine and material to make a product and when a product is sold and converted in cash, the outstanding of the creditors paid-off.

All sales are to be encashed from the debtors so that all the due of suppliers and labors are paid off. This represents that cash is always required whether to start something, keep it in operation and to close. Therefore, it is true that Cash is king.

To improve the cash position of an organization following points are to be adopted:

1) Providing less credit to the debtors and collect the cash as soon as possible.

2) Do not provide much discount to clean the products in hand.

3) Try to pay the suppliers and labor on the disposal of the products.

4) Pay the dividends and bonuses only when cash for the operations are kept aside and cash for disposal stands.

5) Try to use less cash on loan as working capital.

6) organizations musts try to operate on the cash accruals in-side.

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