Edexcel Business A Level Revision

Increasing profitability is often a major aim for growing businesses. There are several ways in which this can be achieved. Businesses are not limited to one of these options but must realise each option has knock on implications. 1) SELL THE SAME AMOUNT AT HIGHER PRICE This will hopefully increase your revenue... HOWEVER , Will you lose customers if prices are raised? What prices do competitors charge? because if you're too high then customers could just go to your competitors as some believe more in a bargain than brand loyalty, so how loyal are your customers? Will you have to spend more on maintaining brand image? Higher prices drives customers away, leaving a bad reputation on the brand so the business may have to maintain its brand image to keep a customer base. This option is only good if the product is price inelastic such as gasoline because the business has a necessity good that consumers don't mind if prices go up a little bit, meaning demand doesn't fall rap...

Cash management - involves the construction of a cash budget Always necessary to hold some cash for transactions, precautionary reasons and for speculative purposes (awaiting a business opportunity) Cash flows should be monitored Excess cash should be profitably invested Provision of overdraft facilities should be negotiated in case of cash shortage. IMPROVING THE CASH POSITION 1) Short term ▪Reduce current assets (stock and debtors) ▪Increase current liabilities (delaying payments) ▪Sell surplus fixed assets 2) Long term ▪ Increase equity finance ▪ Increase long term liabilities ▪ Reduce net outflow on fixed assets SHOULD SELLING PRICES BE DISCOUNTED? Price discounting is designed to improve the cash flow into the business. It generates cash through increased sales. Also reduces stock levels. BUT... ▪It may undermine the firm's pricing structure ▪ It may leave the firm with low stocks ▪ It's success does depend o...