Entrepreneurship and Small Business Management (MNE3701)
Institution
University Of South Africa (Unisa)
Book
Small Business Management
This document contains workings, explanations and solutions to the MNE3701 Assignment 5 (QUALITY ANSWERS) Semester 2 2024. For assistance whats-app us on 0.6.8..8.1.2..0.9.3.4.... Having acquired sufficient knowledge and skills on entrepreneurship and small business management, you must demonstrate...
, Asset Management Strategy for "Fresh Eats Bistro"
Introduction
"Fresh Eats Bistro" is a small, health-conscious eatery located in the heart of
Randburg. The business aims to serve fresh, organic, and locally sourced
meals to customers while promoting sustainable living. The restaurant will be
equipped with a dining area for 50 customers, a kitchen, a storage area for
inventory, and administrative space. The primary assets of "Fresh Eats Bistro"
include cash, accounts receivable, inventory, and equipment (such as kitchen
appliances and furniture). Effectively managing these assets is critical to
ensuring the smooth operation and profitability of the business. This discussion
explores the strategies I would adopt to manage the assets of "Fresh Eats
Bistro" using the knowledge of working capital management, cash flow
management, inventory, accounts receivable, and capital budgeting.
1. Managing Working Capital
The working capital cycle represents the flow of resources through cash,
accounts receivable, and inventory. In a small business like "Fresh Eats Bistro,"
efficient working capital management is crucial to avoid running out of cash.
The goal is to maintain sufficient liquidity while ensuring the business operates
smoothly.
The working capital cycle for the restaurant includes purchasing fresh
ingredients (inventory), converting them into meals (sales), collecting payment
(cash), and then reinvesting that cash into purchasing more inventory. To
optimize the working capital cycle, the restaurant will:
• Minimize inventory costs by carefully managing the stock of perishable
ingredients. For example, rather than over-purchasing, which leads to
spoilage and waste, I will monitor inventory turnover to ensure that
ingredients are used promptly. Assuming "Fresh Eats Bistro" spends
R100,000 on inventory per month, reducing waste by 10% can save
R10,000 monthly, which can be reinvested into other areas of the
business.
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