Customer Footfall Analysis
February 12, 2025
Facebook, Amazon, Apple, Netflix, and Google are together known as the FAANG stocks in the stock market. These stocks have been the darling of the market for the past decade or so. Almost every investor has some of these stocks in their portfolio. However, it seems like the bull run for these stocks is over. […]
The National Stock Exchange (NSE) is one of the two leading stock exchanges in India. Ironically, the National Stock Exchange was created as a result of a huge scam which happened in the Bombay Stock Exchange (BSE). The regulators were of the opinion that the broker nexus in the BSE was too strong. Hence, in […]
The quick ratio is a variation of the current ratio. However, a quick ratio is considered by many to be a more conservative estimate than the current ratio. This characteristic fetches it the nickname of being the “Acid test ratio”. The difference between the current ratio and the quick ratio is the fact that quick […]
The retail sector is often considered to be a part of a single industry that has similar characteristics. However, this is not necessarily the case. It needs to be understood that the retail sector is very diverse. There are many different types of businesses which operate in this sector. These businesses have considerably different characteristics. […]
Xiaomi is considered to be one of the most valuable startup firms in the world now. This firm, which has Chinese origins, has become truly global in nature. It sells world-class products at rock bottom prices all over the world. This firm completely dominates the Indian smartphone market. Given the fact, that India is poised […]
In the previous articles, we have already seen how important cash flow is for the retail sector.
We have also explained how the lack of adequate cash flow can be a cause of concern and even causes many retail businesses to shut down. However, the fact that retail businesses have cash flow issues is an oxymoron within itself.
Ideally, retail is supposed to be a cash flow positive business since customers tend to pay upfront whereas suppliers are generally willing to extend credit.
In this article, we will have a look at some of the common reasons which lead to retailers having inadequate cash flows. The reasons have been explained in detail below:
Now, gross profit is the manner in which retailers earn money which can then be paid off to meet their expenses. When the financial statements of retailers with cash flow issues are analysed, lower than industry gross profits seem to be a common factor amongst all of them.
The bottom line is that when a retailer has a high turnover, they are able to generate far more cash than required in order to pay their bills in a timely manner whereas retailers with low stock turnover generally struggle to pay their bills.
It is common for certain new retailers who are in their growth stage to stretch themselves too thin and use all their cash flow to finance growth in the short run. This may become unsustainable and could lead to money being tied up in growth which could further create a cash flow crisis for the firm.
Retailers who do not maintain healthy emergency funds or do not have access to organized financing from where they can borrow money at a reasonable cost tend to end up in cash flow problems as a result of these crises. It is important for retailers to plan for such situations beforehand.
From the above points, it is clear that there are certain parameters which retailers need to be aware of while planning their cash flow. It is also evident that even though retail is generally a business which can be considered to be cash flow positive, it is possible for a retail company to run into cash flow issues.
Your email address will not be published. Required fields are marked *