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| How Fast Can Your Company Afford to Grow? | 
 enlarge | Authors: Neil C. Churchill, John W. Mullins
Publisher: Harvard Business Review
Category: Book
Buy New: $6.50
Sales Rank: 2407405
Format: Download: Pdf
Media: Digital
Pages: 11
ASIN: B00005RZBK
Publication Date: May 1, 2001
Availability: Available for download now
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| Editorial Reviews:
Product Description
Everyone knows that starting a business requires cash, and growing a business requires even more. But few people understand that a profitable company that tries to grow too fast can run out of cash even if its products are great successes. So a big challenge for managers of any growing concern is to strike the proper balance between consuming cash and generating it. Authors Neil Churchill and John Mullins offer a framework to help identify and manage the level of growth that a company's cash flow can support. They present a formula to calculate an organization's self-financeable growth (SFG) rate, taking into account three critical factors: a company's operating cash cycle--the amount of time the company's money is tied up in inventory and other current assets before customers pay for goods and services; the amount of cash needed to finance each dollar of sales; and the amount of cash generated by each dollar of sales. The authors offer a detailed hypothetical example that carefully considers these three factors; they then illustrate how a company can influence its SFG rate by carefully managing some combination of those factors.
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