Reference no: EM133011237

Barbara and her co-founder had no cash, so they borrowed $250 and started "cutting fabric out on a Ping-Pong table," explains Barbara. "We decided to name the company Vera Bradley (VeraBradley.com) after [my mother]."

• As business grew, Barbara had to manage cash flows. "The first year, we did $10,000 in sales," proclaims Barbara. "Then things got chaotic." While cash flows from operations were good, the business had to expand to meet demand.

• "We went to a bank, seeking a $5,000 loan," says Barbara. The loan was a welcome cash inflow that allowed the company to "build its own building!"

• Barbara admits that she's "not a great finance [and accounting] person," but she insists that accounting and attention to cash flows are key to running a successful business. Mixing in Barbara's special talents, her company is reaching new heights.

• Although cash may be king, Barbara insists that "business is all about forming relationships. My father always said, 'In business, you sell yourself first, your company second, and the product third,' and he was right."

Problem 1: In a business such as Vera Bradley, monitoring cash flow is always a priority. Explain how cash flow can lag behind net income.

Problem 2: What are potential sources of financing for Vera Bradley's future expansion?