Cash and marketable securities @ bec doms ppt

Cash and Marketable Securities Management

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],After Studying Chapter 9, you should be able to:

[object Object],[object Object],[object Object],[object Object],Cash and Marketable Securities Management

[object Object],[object Object],[object Object],Cash and Marketable Securities Management

[object Object],[object Object],[object Object],Motives for Holding Cash

Collections Disbursements Marketable securities investment Control through information reporting = Funds Flow = Information Flow Cash Management System

[object Object],[object Object],[object Object],Collections Speeding Up Cash Receipts

Collection Float : Total time between the mailing of the check by the customer and the availability of cash to the receiving firm. Processing Float Availability Float Mail Float Deposit Float Collection Float

Mail Float : Time the check is in the mail. Customer mails check Firm receives check Mail Float

Processing Float : Time it takes a company to process the check internally. Firm deposits check Firm receives check Processing Float

Availability Float : Time consumed in clearing the check through the banking system. Firm deposits check Firm’s bank account credited Availability Float

Deposit Float : Time during which the check received by the firm remains uncollected funds. Processing Float Availability Float Deposit Float

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Earlier Billing

[object Object],[object Object],Preauthorized Payments

[object Object],[object Object],[object Object],[object Object],Lockbox Systems

[object Object],[object Object],[object Object],[object Object],* Based on the traditional lockbox system Lockbox Process*

[object Object],[object Object],[object Object],[object Object],Lockbox System

[object Object],[object Object],[object Object],[object Object],Concentration Banking

[object Object],[object Object],[object Object],[object Object],Collections Improvements

[object Object],[object Object],Collections Improvements

[object Object],[object Object],[object Object],[object Object],[object Object],Collections Improvements

[object Object],[object Object],[object Object],[object Object],[object Object],Concentration Banking

[object Object],[object Object],[object Object],Concentration Services for Transferring Funds

[object Object],[object Object],[object Object],[object Object],Concentration Services for Transferring Funds

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],S-l-o-w-i-n-g D-o-w-n Cash Payouts

[object Object],Net Float -- The dollar difference between the balance shown in a firm’s (or individual’s) checkbook balance and the balance on the bank’s books. “ Playing the Float”

[object Object],[object Object],Firms should be able to : 1. shift funds quickly to banks from which disbursements are made. 2. generate daily detailed information on balances, receipts, and disbursements. Control of Disbursements

[object Object],[object Object],[object Object],Payable Through Draft (PTD) : A check-like instrument that is drawn against the payor and not against a bank as is a check. After a PTD is presented to a bank, the payor gets to decide whether to honor or refuse payment. Methods of Managing Disbursements

[object Object],[object Object],[object Object],[object Object],Payroll and Dividend Disbursements The firm attempts to determine when payroll and dividend checks will be presented for collection. Methods of Managing Disbursements

F M T W H F M and after (Payday) Percent of Payroll Collected 100% 75% 50% 25% 0% The firm may plan on payroll checks being presented in a similar pattern every pay period. Percentage of Payroll Checks Collected

[object Object],[object Object],Zero Balance Account (ZBA) : A corporate checking account in which a zero balance is maintained. The account requires a master (parent) account from which funds are drawn to cover negative balances or to which excess balances are sent. Methods of Managing Disbursements

[object Object],[object Object],Remote Disbursement – A system in which the firm directs checks to be drawn on a bank that is geographically remote from its customer so as to maximize check-clearing time. This maximizes disbursement float. Remote and Controlled Disbursing

[object Object],Controlled Disbursement – A system in which the firm directs checks to be drawn on a bank (or branch bank) that is able to give early or mid-morning notification of the total dollar amount of checks that will be presented against its account that day. Remote and Controlled Disbursing

[object Object],[object Object],[object Object],Electronic Commerce – The exchange of business information in an electronic (non-paper) format, including over the Internet. Electronic Commerce

Electronic Data Interchange – The movement of business data electronically in a structured, computer-readable format. EDI Electronic Funds Transfer (EFT) Financial EDI (FEDI) Electronic Data Interchange (EDI)

Electronic Funds Transfer (EFT) – the electronic movements of information between two depository institutions resulting in a value (money) transfer. EDI Subset Electronic Funds Transfer (EFT) Society of Worldwide Interbank Financial Telecommunications (SWIFT) Clearinghouse Interbank Payments System (CHIPS) Electronic Funds Transfer (EFT)

EFT Regulation ,[object Object],[object Object],[object Object],[object Object],Electronic Funds Transfer (EFT)

Financial EDI – The movement of financially related electronic information between a company and its bank or between banks. Financial EDI (FEDI) Examples include : Lockbox remittance information Bank balance information EDI Subset Financial EDI (FEDI)

[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],[object Object],Costs and Benefits of EDI

[object Object],[object Object],[object Object],Outsourcing – Subcontracting a certain business operation to an outside firm, instead of doing it “in-house.” Why might a firm outsource?* Outsourcing

[object Object],[object Object],[object Object],[object Object],[object Object],Outsourcing

[object Object],[object Object],[object Object],Cash Balances to Maintain

[object Object],[object Object],Investment in Marketable Securities

[object Object],[object Object],R$ F$ C$ The Marketable Securities Portfolio

[object Object],[object Object],[object Object],[object Object],Variables in Marketable Securities Selection

[object Object],[object Object],[object Object],Common Money Market Instruments

[object Object],[object Object],T-Bills and Bond Equivalent Yield (BEY) Method: ,[object Object],[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],T-Bills and Equivalent Annual Yield (EAY) Method: ,[object Object],[object Object],[object Object],[object Object]

[object Object],[object Object],Common Money Market Instruments

[object Object],[object Object],[object Object],R$ F$ C$ Selecting Securities for the Portfolio Segments

Cash and marketable securities @ bec doms ppt

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Cash and marketable securities @ bec doms ppt