What is cash flow and why is it important?
Cash flow is the movement or flow of money in and out of the business. It is usually measured during a short period of time. It is a measure of the profits that the business gains and the losses due to costs of materials and/or labour.
Cash flow is important because it helps the business get an idea of how much money it is making and how much it is losing which can help it to lower or raise its prices or lower the amount of money it spends on materials and/or labour
Tim Horton’s
This business probably estimated the revenue/cost of its doughnuts buy doing some surveys to see how many people would pay to have these doughnuts and what their preferences were. They probably also looked for a gap in the market and tried to fill it. This gap might have been good quality doughnuts at an average price. This would help them estimate their costs/revenue as it would be able to guess how many people would buy them and they would be able to guess the costs buy seeing how the prices of the ingredients needed changed over time.
The development period of the product probably didn’t affect the cash flow that much as it was just being made. It might have affected the amount of money leaving the business as they were developing and making different versions of the product. The launch period could have been good or bad as they had just launched the product which might make it very popular as it’s a new product and people want to try it. They might have also lost a lot of cash due to the costs of advertising as it is a new product and needs to be advertised to be successful. The growth period might have been god for the cash flow as people are beginning to notice the product and it is gaining more popularity due to the advertising.
Tim Horton’s main products are coffee and doughnuts so their objectives with this product might have been to gain a lot of their income from it as it is their main product
