Analyze the cash flow problems a business might be experiencing Cash flow problems can be caused by a variety of factors, these problems can destabilize the amount of income that will prevent the payment of liabilities that fulfill a business function. The main causes of cash flow problems are: • Low profits or (worse) losses • Overinvestment in capacity • Too much inventory • Giving too much credit to customers • Excessive trading • Unexpected changes • Seasonal demand Each point will be evaluated in this document. Low profits or (worse) losses Profit and loss are the main points to consider in a business because a business is run by the amount of profits it receives. If there is a decline in profit, the company is not functioning properly, which will be a problem for the company. Having a cash flow that projects a profit is vital because it shows that the company is going in the right direction. If a company fails to keep what it spends, it will face enormous financial difficulties that could force the company to close. These issues need to be addressed to ensure the business performs and survives on an annual basis. Overinvestment This is another point that needs to be carefully considered to ensure that the company does not face any problems. If a company were to spend too much on investments without having the financial resources to do so, it will face major problems. Over investment will lead to a loss at the end of the annual revenue which will be a problem for any business as in an economic world every business works to create a profitable business. If a company were to overinvest in fixed costs, it would be a bad turn because turning fixed costs into cash in a short period is complex. In short, some...... half of paper... happen on an annual basis. Production or purchase usually before seasonal peak demand = cash outflows before income. Seasons cause different demands from customers, so products must be suitable. This can be problematic for a company's cash flow because changes in demand in terms of the amount of inventory needed can change, sometimes expected sales are not met, which will leave a dent in the company. However, these problems can be managed through experience so that the company can predict what may happen next year. ReferencesJim Riley. (2012). Cash flow problems. Available: http://www.tutor2u.net/business/finance/cash_flow_problems.html. Last accessed: November 20, 2013.Touch Financial. (2012). Overtrading can create a cash flow gap Available: http://www.touchfinancial.co.uk/overtrading-can-create-a-cash-flow-gap/ Last accessed 20 November 2013.