Prepared by:
Bhargav Joshi
Jaypal Chavda
Nikit Rajani
Jay Raval
Vishal Ghoghari
Dept. of Business Admin., Bhavnagar Univer...
ASPECTS OF MANAGEMENT OF DEBTORS
CREDIT POLICY – Decision on credit period to be
allowed , early payment discount rates e...
IMPORTANT OF PROPER
MANAGEMENT OF RECEIVABLE
 HIGH INVESTMENT
 LOW INVESTMENT
COSTS OF MAINTAINIG
RECEIVABLES
 INTEREST ON INVESTMENT
 ADMINISTRATIVE COSTS
 DELINQUENCY COSTS
 COLLECTION COSTS
 D...
FACTOR AFFECTING CREDIT PERIOD
 NATURE OF PRODUCT
 QUANTUM OF SALES
 CUSTOMS AND PRACTIES
 FUND AVALIABLE WITH THE COM...
FACTOR ANALYSED BEFORE CREDIT
GRANT TO CUSTOMER
 NATURE OF PRODUCT
 NATURE OF CUSTOMER
 QUANTITY PURCHASED
 VALUE OF S...
IMPORTANT SOURCE OF CREDIT
INFORMATION OF CUSTOMER
 TRADE REFERENCE
 BANK REFERANCE
 CREDIT BUREAU REPORT
 PAST EXPERI...
Basic steps of receivable
management
 Find out the profit
 Find out the turn over
 Find out the investment
 Find out t...
A company is selling a product of Rs.10, all
credit sales of 30,000 units V.c. is 6 Rs, A.c. is
Rs.8, F.c. is 60,000. coll...
CASH
 Cash is one of the most liquid and important
components of working capital.
 Holding cash involves cost because th...
What Are The Primary Motive
For Cash Management ?
PREVENTION IS BETTER THAN CURE
 TRANSCATION NEEDS
 SPECULATIVE NEEDS
...
Objectives of cash management
Meeting payment schedule
• Prevent insolvency
• Relationship is not strained with bank
• Fo...
Factors determine the required
cash balances
Short costs
expense
incurred
shortfall of cash
Transaction
cost
brokerage
inc...
CASH MANAGEMENT MODEL
MODEL CAN BE CLASSIFIED INTO THREE CATEGORIES
• It assume that the demand for cash can be
predicted ...
Cash budget
 Statement inflow & outflow cash estimate
it’s short term requirement
 The cash budget helps the firm to pla...
Cash management techniques/
process
 Speedy cash collection
 Prompt payment by customers
 Every conversion of payments ...
Contents
Meaning of Inventory
Concept of inventory
Types of inventory and Reasons for holding inventory
Inventory costs
Pu...
– Inventory refers to a stock of
goods, commodities, or other economic
resources that are held by firms at a particular
ti...
– Inventory control refers to
the process whereby the
investment in materials and
parts carried in stock is
regulated with...
Important Of INVENTORY
 Inventories represent a significant amount of firm's
assets.
 Inventories must be properly manag...
3/19/2014 23
Concept of inventory
Inventory Can be defined as a usable
resources which is physical and tangible.
Inventory...
Inventory could be raw-materials, WIP,
finished products or the spare parts and
other indirect materials.
Inventory turnover ratio = Annual demand /
Average Inventory
- It is an index of business performance.
Sound management gi...
Types of inventory and Reasons
for holding inventory
Raw materials Inventory
Stores and Spares
Work-in-Process Inventory
F...
Inventory costs
Purchase cost
- Cost of purchasing a unit of item
Holding (or carrying) costs
- Costs for storage, handlin...
 Ordering costs
 Costs of placing an order, etc.
 Stock out costs
 Costs incurred due to shortage of stock, loss of sa...
Cost Minimization Goal
Ordering Costs
Holding
Costs
Order Quantity (Q)
C
O
S
T
( Rs.)
Annual Cost of
Items (DC)
Total Cost...
Purpose of inventory
Smooth production
Better services to customers
Protection against business uncertainties
Take advanta...
Reasons for Inventories
 Improve customer service
 Economies of purchasing
 Economies of production
 Transportation sa...
Reasons Against Inventory
 Non-value added costs
 Opportunity cost
 Complacency
 Inventory deteriorates, becomes obsol...
Economic Order Quantity ( EOQ ) model
ABC Analysis
FSN Analysis
HML Analysis
Tools / Techniques for Inventory
control
Functions of inventory
Regularizing demand and supply
Economizing purchases or
productions by lot buying or
batch producti...
Cost of inventory accumulation
Disadvantages of
inventory accumulation
 Locking up of working
capital
 More storage spac...
Major activities in inventory control
Planning the inventory
Procurement of inventory
Receiving and inspection of inventor...
 In nutshell, we can say that the
objective of inventory management is to
order the right quantity, at the right
time wit...
Financial management
Financial management
Financial management
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Financial management

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Receivable Management
Cash Management
Inventory Managment

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Financial management

  1. 1. Prepared by: Bhargav Joshi Jaypal Chavda Nikit Rajani Jay Raval Vishal Ghoghari Dept. of Business Admin., Bhavnagar University, Bhavnagar. Guided by: Dr. B.C. AJMERA SUBMITTED TO: RECEIVABLE MANAGEMENT CASH MANAGEMENT INVENTORY MANAGEMENT
  2. 2. ASPECTS OF MANAGEMENT OF DEBTORS CREDIT POLICY – Decision on credit period to be allowed , early payment discount rates etc .  CREDIT ANALYSIS – Decision on whether credit can be extended to a particular customer . CONTROL OVER RECEIVABLES –Step for debtor follow –up , faster collection of debtors.
  3. 3. IMPORTANT OF PROPER MANAGEMENT OF RECEIVABLE  HIGH INVESTMENT  LOW INVESTMENT
  4. 4. COSTS OF MAINTAINIG RECEIVABLES  INTEREST ON INVESTMENT  ADMINISTRATIVE COSTS  DELINQUENCY COSTS  COLLECTION COSTS  DEFAULTING COSTS
  5. 5. FACTOR AFFECTING CREDIT PERIOD  NATURE OF PRODUCT  QUANTUM OF SALES  CUSTOMS AND PRACTIES  FUND AVALIABLE WITH THE COMPANY  CREDIT RISK
  6. 6. FACTOR ANALYSED BEFORE CREDIT GRANT TO CUSTOMER  NATURE OF PRODUCT  NATURE OF CUSTOMER  QUANTITY PURCHASED  VALUE OF SALES  CREDIT WORTHNESS OF THE CUSTOMER  RISK OF BAD DEBTS
  7. 7. IMPORTANT SOURCE OF CREDIT INFORMATION OF CUSTOMER  TRADE REFERENCE  BANK REFERANCE  CREDIT BUREAU REPORT  PAST EXPERIENCE  PUBLISHED FINANCIAL STATEMENT
  8. 8. Basic steps of receivable management  Find out the profit  Find out the turn over  Find out the investment  Find out the total cost  Find out the next profit
  9. 9. A company is selling a product of Rs.10, all credit sales of 30,000 units V.c. is 6 Rs, A.c. is Rs.8, F.c. is 60,000. collection period is 30 days. Company wants to relaxes its credit standards and that will result 15% increase in sales. The average collection period would be increase to 45 days. There is no any bed debt exp. O.c. is 15%. In the right of above case, should the firm relaxe the credit standard?
  10. 10. CASH  Cash is one of the most liquid and important components of working capital.  Holding cash involves cost because the worth of cash held, after a year will be less than the value of cash as on today.  Excess of cash balance should not be kept in business because cash is a non-earning asset.  Hence, a proper and judicious cash management is of utmost importance in business.
  11. 11. What Are The Primary Motive For Cash Management ? PREVENTION IS BETTER THAN CURE  TRANSCATION NEEDS  SPECULATIVE NEEDS  PRECAUTIONARY NEEDS  COMPENSATING NEEDS
  12. 12. Objectives of cash management Meeting payment schedule • Prevent insolvency • Relationship is not strained with bank • Fostering good Relation • Cash discount can be availed • Good credit rating • Pay unexpected expenses Minimizing funds committed to cash balance  High level of cash balance  Low level of cash balance
  13. 13. Factors determine the required cash balances Short costs expense incurred shortfall of cash Transaction cost brokerage incurred Borrowing cost borrowing to cover the shortage Loss of cash discount A substantial loss because of temporary shortage of cash Penalty rate by banks to meet a shortfall in compensating balance Excess cash balance cost Excessively large cash balance Procurement & management Establishing & operating cash mgt. staff & activity Salary , handling of security etc. Uncertainty & cash management Flood, fire etc.
  14. 14. CASH MANAGEMENT MODEL MODEL CAN BE CLASSIFIED INTO THREE CATEGORIES • It assume that the demand for cash can be predicted with certainty , provides cost efficient transaction & conversion cost . BAUMOL MODELS C.C.= Tb⁄c • Optimum cash balance level which minimizes the cost of cash management MILLER-ORR MODELS M.O. = √3br2⁄4i • It can be determined through multiple linier programming methods . ORGLER’S ANALYTICAL MODELS Maximize profit= a1x1+a2x2
  15. 15. Cash budget  Statement inflow & outflow cash estimate it’s short term requirement  The cash budget helps the firm to plan for the actual receipt and disbursement of cash.  It has three parts namely, cash collections, cash payments & cash balance  The company estimates the sales for each period during the planning period
  16. 16. Cash management techniques/ process  Speedy cash collection  Prompt payment by customers  Every conversion of payments into cash  concentration banking  Lock box system  Slowing disbursements  Avoidance of early payment centralized disbursements
  17. 17. Contents Meaning of Inventory Concept of inventory Types of inventory and Reasons for holding inventory Inventory costs Purpose of inventory Tools / Techniques for Inventory control Functions of inventory Reasons for inventory carrying Cost of inventory accumulation Major activities in inventory control Conclusion
  18. 18. – Inventory refers to a stock of goods, commodities, or other economic resources that are held by firms at a particular time for their future production requirement and for meeting future demands. – Inventory management assist organizations in minimizing their inventory cost without compromising on their ability to respond quickly to customer demand. Meaning of Inventory
  19. 19. – Inventory control refers to the process whereby the investment in materials and parts carried in stock is regulated within pre- determined limits set in accordance with the inventory policy established by the management.
  20. 20. Important Of INVENTORY  Inventories represent a significant amount of firm's assets.  Inventories must be properly managed so that this investment doesn't become too large, as it would result in blocked capital which could be put to productive use elsewhere.  On the other hand, having too little or small inventory could result in loss of sales or loss of customer goodwill. An optimum level of inventory, therefore, should be maintained.
  21. 21. 3/19/2014 23 Concept of inventory Inventory Can be defined as a usable resources which is physical and tangible. Inventory management aims at maintaining an adequate supply or something to meet the expected demand pattern subject to budgeting considerations.
  22. 22. Inventory could be raw-materials, WIP, finished products or the spare parts and other indirect materials.
  23. 23. Inventory turnover ratio = Annual demand / Average Inventory - It is an index of business performance. Sound management gives a higher inventory turnover ratio.
  24. 24. Types of inventory and Reasons for holding inventory Raw materials Inventory Stores and Spares Work-in-Process Inventory Finished Goods Inventory Maintenance, repair, and operational (MRO) inventory
  25. 25. Inventory costs Purchase cost - Cost of purchasing a unit of item Holding (or carrying) costs - Costs for storage, handling, insurance, etc. Setup (or production change) costs - Costs for arranging specific equipment setups, etc.
  26. 26.  Ordering costs  Costs of placing an order, etc.  Stock out costs  Costs incurred due to shortage of stock, loss of sale etc.
  27. 27. Cost Minimization Goal Ordering Costs Holding Costs Order Quantity (Q) C O S T ( Rs.) Annual Cost of Items (DC) Total Cost By adding the item, holding, and ordering costs together, we determine the total cost curve.
  28. 28. Purpose of inventory Smooth production Better services to customers Protection against business uncertainties Take advantage of quantity discounts
  29. 29. Reasons for Inventories  Improve customer service  Economies of purchasing  Economies of production  Transportation savings  Hedge against future  Unplanned shocks (labor strikes, natural disasters, surges in demand, etc.)  To maintain independence of supply chain
  30. 30. Reasons Against Inventory  Non-value added costs  Opportunity cost  Complacency  Inventory deteriorates, becomes obsolete, lost, stolen, etc.
  31. 31. Economic Order Quantity ( EOQ ) model ABC Analysis FSN Analysis HML Analysis Tools / Techniques for Inventory control
  32. 32. Functions of inventory Regularizing demand and supply Economizing purchases or productions by lot buying or batch production Allowing Organizations to cope with perishable materials Inventory can store labour
  33. 33. Cost of inventory accumulation Disadvantages of inventory accumulation  Locking up of working capital  More storage space  High storage charges  High taxes  Greater handling and distribution cost  Deterioration in quality Disadvantages of inventory depletion  Production stoppages  Idle machine capacity  Burden of fixed overhead  Failure to meet delivery order resulting into loss of goodwill
  34. 34. Major activities in inventory control Planning the inventory Procurement of inventory Receiving and inspection of inventory Carrying and issuing of inventory Recording the receipts and issues of inventory Follow-up function Material standardization and substitution
  35. 35.  In nutshell, we can say that the objective of inventory management is to order the right quantity, at the right time without disrupting the production process. Conclusion

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