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POD Enterprises’ Cash Flow Exercise:Q1: Yes, I would invest because investing can bring you many benefits, such as
helping to give you more financial.
Q2: O’Dell could potentially finance the negative balance by seeking additional
investment, renegotiating terms with suppliers or creditors, or considering short-term
loans to cover the shortfall:
1. Seek Additional Investment: O’Dell might approach investors or seek additional
funding from stakeholders willing to inject capital into the business to cover the
shortfall.
2. Renegotiate Terms with Suppliers or Creditors: Negotiating extended payment
terms or revising agreements with suppliers or creditors could help manage cash flow
more effectively in the short term.
3. Short-Term Loans or Overdrafts: O'Dell could consider short-term loans or
overdraft facilities from financial institutions to cover the temporary financial gap.
Q3: the bank manager, evaluating the potential lending decision considering the
sales doubling and variable costs rising by 50%, would take a more cautious
approach:
- Increased Sales: Doubling sales is promising, but if the variable costs increase
significantly, it might affect the company's profitability. The bank manager would
need assurance that increased sales would result in a proportional or higher increase
in profit to ensure loan repayment.
- Impact on Profitability: A thorough analysis of the impact of increased variable costs
on the company's profitability would be crucial. If the margins decrease due to higher
variable costs, the bank manager might be more cautious about extending further
loans without a solid plan to maintain profitability.
- Evaluation of the Business Plan: The bank manager might request an updated
business plan and financial projections to assess how the company plans to manage
the increased costs and maintain healthy margins with the anticipated growth in
sales. This scrutiny ensures a clear understanding of the company's strategy to handle
the increased variable costs while scaling operations.
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