Finance - Cash flow and working capital - Cash flow

6 important questions on Finance - Cash flow and working capital - Cash flow

Why is cashflow almost never equal to net profit?

  • Get paid promptly
  • Don't pay directly their own purchases
  • Generates sales cash can be reinvested into the business

What is the breakeven point (BEP)?

The point at which there is no net loss or gain (nul)

Why has a follower (imitator) invest less in order to develop a product?

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  • Reverse engineering
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What are the consequences of fierce competition?

  • Price product drops
  • Market attractiveness shrinks
  • Profitability shrinks

What is the definition of window of opportunity?

The period during which markets are attractive and products or sevices can be profitably sold

What are the advantages/disadvantages of being a first mover (innovator)?

Advantages
  • Larger window of opportunity
  • Larger cumulative cash flow
  • Ability to protect it's IP
  • Exclusive arrangements with the best suppliers
  • Set standards in the market
  • Gain customer loyalty
Disadvantages
  • Higher investment
  • Technical uncertainty
  • Commercial uncertainty
  • Higher risks

The question on the page originate from the summary of the following study material:

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