Friday, June 24, 2011

June 24, 2011

Dear Kids,
      Under the tough economy, it is very difficult for the bank to give out the money because all the good businessmen are very careful to select the project before they jump into the future extension of the business.  Most of them are more careful to get the loan from the bank.   In most of the cases, the bank will also selects their project to give the loan by requiring a lot of guarantee in the projects.  In most of the cases, the good and strong company will reserve a strong cash flow to face the bad economy such as 3M and IBM whose stocks are very strong in the recession time.  Most of the time in this economy, the company will file Chapter 11 to reorganize the financial situation.  If the company couldn't meet the financial situation, the company will file Chapter 7 as a total bankruptcy which to stop all the creditors to as for the money.
     The Chapter 11 and 13 will be the same which allows the companies to find a way out to reorganize the financial in a better situation by stop paying the creditors in a short period of time in order they can find a buyer or the new bank to finance the project.  If they couldn't do it, the company will file Chapter 7 instead to stop all the creditors and the businesses.   
     The simple formula in any of the business is as following:
            Revenue - Expense  = Cash flow
      The cash flow must be positive and if the negative cash flow comes, you need to start stopping it until it is too late.
      The ways to stop the cash flow of the business until it is too late as following:
         1. Injecting more cash to stop the negative cash flow.
         2. Meeting the bank and ask for more capital by giving a better business proposal to explain why you need to improve this business.
         3. Sell the business.
         4. Get more partners or investors.
         5. Joint Venture with the other company.
         6. Sell it to the other stronger partners to reduce the liability. 

No comments:

Post a Comment