OPERATIONAL GEARING Definition

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OPERATIONAL GEARING is the higher the proportion of fixed costs relative to variable operating costs, the higher the operational gearing. This results in greater business risk. A retailer has high fixed costs relative to variable costs, so has a lot of business risk. See GEARING and FINANCIAL GEARING.

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CASH MANAGEMENT is the management of the cash balances of a concern in such a manner as to maximize the availability of cash not invested in fixed assets or inventories and to avoid the risk of insolvency. According to Keynes there are three motives for holding cash: the transactions motive, the precautionary motive, and the speculative motive. The most useful technique of cash management is the cash budget.

NEGATIVE WORKING CAPITAL is when current liabilities exceed current assets.

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