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ch17.ppt
 

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?