Managing your Budget = Better Financial health.
Cash management has been always one of the biggest challenges of any type of company, at any level of financial health can face. As a matter of fact, it can make or break a business. From companies like Yahoo to Apple, cash management is an engineering talent not every organization can master. See below the ways we suggest that you can plan to manage your capital.
1. Research and Development Investment:
R&D is the go-to many companies go to if an excess of cash happens. Investing in a new way to do business, such as creating new patented technologies, creating a partnership with innovative teams that can put companies ahead of their competitors. Such as Amazon, Apple, Microsoft, and Intel. As a fact, Amazon allocates as much as 32 percents in Research and development (which is around 7.8 Billion Dollars), whereas the IT and Biotech sector are usually the leading invests in Research and development.
2. Strategic Acquisitions
Acquisitions can be a great way to manage excess cash, investing in a strategic buyout can make or break a company. Doing so needs requires having a deep insight into the buyouts value, from evaluating its assets to projecting its sustainability toward its industry and its competitors.
The Yahoo acquisition of Broadcast Com is a great example of a bad purchase.
Yahoo purchased Broadcast Com for 5.7 Billion dollars, and Broadcast Com only had 13 Million dollars in sales. Of course, Broadcast Com never took off under Yahoo. It was a start to fade-away as the company started losing its investors confidence, then lost any market share to its competitor Alphabet.
To be successful in an acquisition takes careful consideration.
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3. Buying Back Shares
Buying back shares is the least risky option. many companies buy back their shares to consolidate their decision-making powers, in the case of having many outstanding shares. Also, it increases the value of their share value, as it is a major indicator of a company's financial health.
Many cash generating machine companies have adopted this strategy such as Nike, Apple, etc.
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