Cakelove and Love Cafe

Topics: Finance, Accounts receivable, Balance sheet Pages: 2 (550 words) Published: May 24, 2013
Cakelove and love cafe

1. How was Warren Brown able to finance the growth of his company?

Warren financed his first storefront by securing a commercial loan from his community bank, CityFirst Bank of DC because other commercial leaders in larger, mainstream financial institutions thought it was a particularly good credit risk.

After opening CakeLove, he turned again to CityFirst Bank to finance it because CakeLove was too new to have positive cash flow to support itself.
After CakeLove opened three additional retail bakeries, CiryFirst Bank financed each location to supplement earnings generated from existing operations.

2. What methods has Cakelove used to manage cash flow? What others might it adopt?

First, Warren managed inventory to manage cash. He and his team have instituted a waste-tracking system which is helpful to keep a “pretty good eye on the way inventory is moving.”
Second, Warren used cash-handling policy to manage cash. He established a cash-counting system to avoid inventory theft problems and pilferage from the cash drawer.
Third, Warren managed the company by leveraging resources and partnering with a community leader to avoid selling shares of the company.
What else he might to adopt is managing account receivable and payment of the company.

3. What types of cash flow management issues would you expect cakehole to encounter if it grows at a rate of three bakeries per year or more?

Growth is good, but rapid growth can sometimes overwhelm the ill-prepared business owner, so it is very important to create a healthy cash flow. First, the company was growing not based on solid ground. When company faced growing too fast, it may seek to take advantage of market opportunities even if they lack the necessary capital for the project. The undercapitalization of projects soon becomes their undoing. Second, the company may have problems in serving loans. The company may experience problems with their account...
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