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Simple Business


Purchasing a property at an auction is an exa mple of contest . In this situation,
competing bids are submitted until the property is sold.
Lodging co mpetitive tenders to purchase an asset or win a customer's
account for a service agree ment is also a contest situation.
1.5. Growth & survival
1.5.1. Survival
Survival is primarily a cash flow issue.
While long-term growth involves development, assets, and profitability,
survival in the short and mediu m term involves cash flow and available cash
reserves.
In cases where the cash inflow is less than the cash outflow, the operation of
the business would be unsustainable on a long-term basis.
This would eventually reduce the assets within the business to zero, and the
business would cease to operate.
In other cases the inflow may be less than the outflow on a te mp orary basis
due to seasonal changes, the timing of la rge cash transa ctions, or funding of a
ma jor develop ment or start-up activity.
In these cases, survival may be dependant on a combination of increasing
available funds, reducing outflows, and increasing inflo ws.
Ra ising funds can occur through selling assets , using overdrafts, and loan
facilit ies.
In these situations additional debt cannot usually be raised, however e xisting
debt facilities may be available.
Reducing e xpenses may involve some of the following steps
? Changing an e xpense to an alternative with a lower cost, such as
moving to alte rnative pre mises with a lo wer rent.
? Postponing expenses that do not relate directly to e xisting
production, such as research and product development.
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