Business Finance | The Big River | Chapter 2 – No Cash? Can we borrow what we need?
What happens if we run out of cash?
“John, are you ready for our meeting? We said yesterday that we were going to meet to go over our financial projections and review a possible bank proposal.”
“I’ll be right there, Tom,” John Wilson, company CEO said to his controller.
John reflected on their conversation last week about the Company’s expected negative cash flow and the need to borrow from their bank, most of which resulted from giving extended terms to their customers.
John learned his lesson and wanted to avoid borrowing, but Tom had been pretty explicit about the need.
First, we need to review our short term cash needs
“John, I’ve gone over our short term cash needs again,” Tom said after they gathered in the conference room and were looking at some numbers on the overhead projector.
“I’ve created a simple example on the screen with all the numbers shown in thousands, which you can see in Figure 1 – Borrowing Availability, below. (more…)
“Financial Adrenaline” is a term we love around here because it reflects our commitment to help you turbocharge your business with practical tips and techniques to improve free cash flow, the lifeblood of business. As a further extension of our Financial Adrenaline program, we’re going to share a new 
I want to plant another seed this week about an often misunderstood concept: [kastooltip msg=”DEPRECIATION” tooltip=”In accounting, an expense recorded to allocate a tangible asset’s cost over its useful life. Because depreciation is a non-cash expense, it increases free cash flow while decreasing reported earning. It is used in accounting to try to match the expense of an asset to the income that the asset helps the company earn. For example, if a company buys a piece of equipment for $1 million and expects it to have a useful life of 10 years, it will be depreciated over 10 years. Every accounting year, the company will expense $100,000 (assuming straight-line depreciation), which will be matched with the money that the equipment helps to make each year.”]. (You can see the definition by placing your cursor over the term.)
