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ch17.ppt

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ch17.ppt ch17.ppt Presentation Transcript

  • Working Capital
    • Current assets
      • Cash
      • A/R
      • Inventory
    • Current liabilities
  • Working Capital
    • Cash
      • Minimize cash
        • Returns available on cash
        • Business accounts
      • Need for cash
        • Pay bills
        • Take advantage of opportunities
          • Lines of credit
  • Working Capital
    • Float
      • Balance per books
      • Balance per bank (available balance)
      • Float = difference between two balances
        • Outstanding checks: disbursement float
        • DIT: collection float
        • Which of the two is generally larger?
  • Working Capital
    • Creating float
      • Time payment is in mail
        • IRS
      • Processing
        • IRS
      • Availability
        • Clear banking system
        • How do checks travel?
  • Working Capital
    • Managing float
      • Is it disappearing?
        • EDI/Automated payments
        • Debit cards
  • Working Capital
    • Cash collection
      • Automated payments
      • Lockboxes
        • Locations
  • Working Capital
    • Cash disbursements
      • Zero balance accounts
        • Transfer to subaccount such as payroll
      • Overdraft protection
  • Working Capital
    • Investing cash: Exxon $38.4 bil as of 9/08
      • Typically in short-term securities
        • Maturity < 90 days
        • No default risk
        • Liquid
        • Taxable vs. tax-exempt
  • Working Capital
    • Types of short-term securities
      • Money market accounts
        • Banks
        • Mutual funds
      • T-bills
      • Muni short-term securities
      • Commercial paper: unsecured
      • CDs
      • Adjustable preferred stock: dividend exclusion (70%)
  • Working Capital
    • Credit sales
      • Terms of sale
        • 5/30, n/90
        • Length of credit period
          • Time to turnover product
          • Competition
          • Credit risk
  • Working Capital
    • Credit sales
      • Terms of sale
        • 5/30, n/90
        • Pay $95.00 by 9/5; otherwise $100.00 by 11/15
        • Effective return to buyer
        • Why offer these terms?
  • Working Capital
    • Credit policy
      • Steak N Shake: why formerly no credit cards?
      • Benefits of selling on credit
        • Increased sales
      • Cost of selling on credit
        • Cost of A/R
        • Bad debt
        • Managing credit department
          • Credit cards?
  • Working Capital
    • Credit analysis
      • Scoring
        • Experian: 340-820
        • Factors
          • Pay bills on time: minimum?
          • Real estate loans
          • Number of credit cards, balances, available balance
          • Applications for credit
  • Working Capital
    • Credit analysis
      • Character: willingness to pay
      • Capacity: ability to pay
        • Aging schedule on page 527
      • Capital: assets
      • Collateral: pledged assets
      • Conditions: business conditions
  • Working capital
    • Inventory
      • Not too much…
        • Storage
        • Insurance
        • Obsolescence
        • Theft
        • Cost of carrying inventory
  • Working capital
    • Inventory
      • Not too little:
        • Lost sales
        • Restocking
      • Just right
        • EOQ
          • Impact of change in fixed costs; carrying costs
          • Safety stock
          • Reorder point
        • MRP: what do I need to build a car?
        • JIT: who holds the inventory?