Cash Budget Mnemonic

I have been working on some Mnemoics for study and I have one for cash budgets and their uses.

MEAT

Cash budgets can Motivate employees as they can see how the firm is performing.

They can be used to control Expenditure in order to keep a positive cashflow.

Cash budgets can be used to take corrective Action by arranging a loan to ensure the firm does not go bust.

They can also be used to set Targets for managers, employees and departments to meet.

Higher Business Management - Cash Flow Question

From 2005 Past Paper

Identify 4 sources of cash flow problems and suggest one solution for each source you have identified.

Sources of cash flow problems:
too much money tied up in stock
allowing customers too long to pay debtors
not paying on time
high levels of borrowing along with high interest rates
high drawings
low sales
high expenses
purchasing capital equipment

Solutions
introduce JIT
offer discounts to encourage prompt payment
offer discounts/promote cash sales
sell any unused assets
reduce loans by eg increasing number of investors
debt factoring
sale and leaseback
extended credit
arrange overdraft/loan
cut costs
promote product or services

This is a question that turns up in one shape or another. The important thing to remember is the difference between identifying the problems and the actual solutions.

This is the kind of question that seems daunting, but in actual fact if you get to know it well, you will realise that the question can never really be worded too differently and that the same answers normally apply to what is in effect a banker question.