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Arcane

Hey, I'm on Medial • 1y

Imagine a company's purchasing team negotiates amazing deals with suppliers, getting extended credit terms (like a long payment deadline on your credit card). This frees up cash. But what if the sales team is so good they collect payments from customers quickly (like immediately paying off your credit card)? Now the company has excess cash sitting around. This is where things get tricky. If the company has long-term projects needing funding (like buying new equipment), they might be tempted to use that short-term cash to pay for them. The problem? It's like using your credit card to buy groceries - it might seem convenient, but it can lead to big problems down the road if you can't pay it back on time. This is a classic financial management mistake - using short-term funds for long-term needs. ❌ Lesson learned: Businesses need to carefully match the timing of their cash inflows and outflows to avoid financial trouble.

5 Replies

Replies (5)

Anonymous 4

Hey I am on Medial • 1y

Credit is a huge problem for individuals and organizations that can’t leverage debt.

1 Reply

Anonymous 2

Hey I am on Medial • 1y

Business 101

1 Reply

Pratik Jaluka

Business Analyst • 1y

If you have cash laying around, you either spend to grow or just save it for a rainy day. But again, totally depends on the type of enterprise.

Anonymous 3

Hey I am on Medial • 1y

I know someone who suffered because of this. Having multiple accounts and keeping a tab on spends is important but most important is repaying credit in time.

Anonymous 1

Hey I am on Medial • 1y

Credit if mismanaged can lead to bankruptcy in most cases.

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