BU121 Study Guide - Midterm Guide: Contribution Margin, Variable Cost
Document Summary
Businesses that show a profit can still go bankrupt: lack of real" cash profit is locked in accounts receivables, profit doesn"t = cash. Real human and financial capital must be rented" from owners. A ventures financial objective is to increase value. Different measures at different stages: development stages, survival stage, rapid-growth stage. Development and startup issues: cash burn rate how quickly a venture uses cash, liquidity ability to meet short-term financial loans, conversion period how quickly you convert to cash capital cycle (industry dependent) Cash burn rate: how quickly you spend or burn through your cash. Cash build rate: how quickly you are able to build or increase your cash through sales revenue on collections of sales (you have to collect the money on the sale before it counts. Liquidity to be liquid enough to cover expenses. = cash operating expenses (cost of goods sold,, administrative, marketing, interest, taxes) +
