Objective of stock control

-          Ensures that sufficient stock is on hand to satisfy demand.

-          Protects and monitors theft.

-          Safeguards against having to supply.

-          Allocates for control over selling and cost price.

There are numerous disadvantages to the stockpiling, the following are some of the cases:

-          Obsolescence

-          Thret of fire and theft

-          Initial working capital investment is very considerable

-          Losses due to price fluctuation

This refers to the acquisition of stock at the right time, at the right price and in the correct quantities.

There are a number of advantages to the stockpiling, the following are some of the cases:

-          Losses due to price fluctuations and stock loss kept to a lowest amount

-          Makes sure that goods reach customers timeously; improved service

-          Saves space and storage cost

-          Investment of working capital kept to lowest amount

-          No loss in production because of delays

Duties of the credit department are the following:

-          Legal action

-          Taking required steps to ensure settlement of account

-          Acknowledgement of the credit policy and procedures for credit control

-          Establishment of credit limits

-          Making sure that statements of account are sent out

-          Making sure that thorough checks are carried out on credit clients

-          Keeping records of all of the amounts owing

-          Making sure that debts are settled punctually

-          Appropriate reporting to the upper level of management for improves management.

Credit gives the customer the opportunity to purchase goods and services, and pay for them after a certain period of time.

 Advantages of credit trade are:

• Typically results in more clients than cash trade.
• Can charge more for products in order to cover up the risk of bad debt.
• Obtain goodwill and loyalty of clients.
• People can purchase products and pay for them at a later date.
• Farmers can purchase seeds and implements, and pay for them only as soon as they have the harvest.
• Stimulates agricultural and industrial manufacture and commerce.
• Credit trade can be used as a promotional tool.
• Raise up the sales.
  

  The major disadvantages of credit trade are the following:

  • Possibility of bad debt.
  • Considerable administration expenses.
  • People can purchase more than they can manage to pay.
  • More working capital is needed.
  • The possibility of risk of bankruptcy.

The cash budget has the following six chief sections:

1. Starting Cash Balance - includes the last period’s closing cash balance.

2. Cash collections - contains all expected cash receipts (all sources of cash for the period considered, predominantly sales)

3. Cash disbursements normally lists all planned cash outflows for the period, not including interest payments on short-term loans, that appear in the financing section. All expenses that do not influence cash flow are disqualifies from this list (for example depreciation, amortization, and so on)

4. Cash excess or deficiency - a role of the cash needs and cash obtainable. Cash needs are determined by the entire cash disbursements plus the minimum cash balance needed by company policy.

5. Financing - discloses the planned borrowings and repayments, together with interest.

6. Ending Cash balance - merely reveals the planned ending cash balance.

This concerns fixed asset requirements for the next five years and how these will be financed.

Working capital requirements of a company should be monitored at all times to make sure that there are adequate funds available to meet short-term expenses.

The cash budget is fundamentally a detailed plan that shows all expected basis and uses of cash.

As a rule budget is a document that documents the Plan of the industry, This may contain the objective of business, targets set, and outcome in financial terms, it means the target set for sale, resulting expenses, growth, required investment to attain the planned sales, and financing source for the asset. At the same time budget may be long term or short term. Long term have a time horizon of 5-10 years giving a visualization to the business, short term is an year budget that is drawn to control and function in that particular year.

Another business choice concerning finance is investment, or fund management. An investment is an acquirement of an asset in the hope that it will preserve or increase its value. In investment management – while choosing a portfolio – one has to make a decision on what, how much and when to invest. To do this, a business should:

• Identify significant objectives and constraints: institution or individual aims, time horizon, risk aversion and tax deliberation;
• Identify the suitable strategy: active v. passive – hedging strategy
• Estimate the portfolio performance

Managerial or corporate finance is the assignment of providing the funds for a corporation’s activities. For small business, this is referred to as SME finance. It usually involves balancing risk and productivity, while attempting to maximize an entity’s wealth and the importance of its stock.

Long term capital is provided by ownership equity as well as long-term credit, frequently in the form of bonds. The balance between these forms the businesses capital structure. Short-term capital or working capital is regularly provided by banks extending a line of credit.

Questions in personal finance rotate around

• How much funds will be needed by a human being (or by a family), and when?
• Where will this capital come from, and how?
• How can people defend themselves against unforeseen individual events, as well as those in the external economy?
• How can family possessions best be transferred across generations (bequests and inheritance)?
• How does tax policy (tax subsidies or penalties) influence personal financial decisions?
• How does credit influence an individual’s financial standing?
• How can a person plan for a secure financial future in an environment of economic unsteadiness?