4. Money as
the Key Idea
This
definition
gives us
three
purposes
for
money:
1. To facilitate exchanges of
unlike assets, such as your
labor for a grocerās food.
2. To measure the value of
things, both tangible, such
as jewellery, and intangible,
such as pain and suffering.
3. To keep track of wealth.
5. Cash and
Cash
Equivalents
Cash is money, but itās only one form of
money, a subcategory of money that is
immediately available to be spent. Not all
money is āspendable.ā
Currency is the most familiar form of
cash: bills and coins that represent
money.
Demand deposits make up most of the
noncurrency cash. Demand deposits are
accounts that let you withdraw (what
bankers call demand) any amount of the
balance immediately
6. The Importance of
Money
Management
Cash flow management: Planning
and tracking the amounts and
timing of money to be received and
paid during the business cycle.
7. Money In/Money
OutāJust
How Important Is It?
ā¢ Cash-to-cash cycle:
The time that is
required for a
business to acquire
resources, convert
them into product,
sell the product, and
receive cash from the
sale.
ā¢ Operating cycle: See
cash-to-cash cycle
8. ā¢ Payables: Amounts owed to
vendors for merchandise or
services purchased on credit
(see receivables).
ā¢ Receivables: Amounts that are
owed to a business for
merchandise that was sold on
credit (see payables).
9. Managing Cash Flow
Company and Bank Cash Balances
ā¢ Company book balance: The sum of cash
inflows and cash outflows recorded in the
firmās accounting records.
ā¢ Bank ledger balance: The sum of deposits and
withdrawals recorded in a bankās accounting
records.
ā¢ Bank available balance: The sum of money
that has actually been received and paid out of
a depositorās account.
ā¢ Clearinghouse: An entity that processes checks
and electronic fund transfers for banks and
other financial organizations.
ā¢ Overdraft: A negative balance in a depositorās
bank account.
Capital budgeting/project financing
pecking order theory
Internal:
-
-
External
-
-
-
-
10. Reconciling
Bank Balances
with Company
Book Balances
Reconciling: An accounting process that
identifies the causes of all differences
between book and bank balances.
Nonsufficient funds (NSF): A situation that
occurs when a check is returned to a
depositor because the writer of the check
did not have a bank available balance equal
to or greater than the amount of the check.
Charge back: A reduction in the bank
account of a merchant by a credit card
company.
11. Planning
Cash Needs
Cash budget: A cash budget
identifies when, how, and
why cash is expected to
come into the business, and
when, how, and why it is
expected to leave.
ā¢ Sales Budget: Forecasting
Sales Receipts For many
small businesses, the
sales forecast is the cash
receipts forecast.
12. Planning
Cash Needs
Cash budget: A cash budget
identifies when, how, and
why cash is expected to
come into the business, and
when, how, and why it is
expected to leave.
ā¢ Cash receipts budget: A
schedule of the amounts
and timings of the receipt
of cash into a business.
13. Forecasting
Cash
Disbursements
A similar approach is
used for the forecasting
of cash disbursements.
The estimates of
expenses that you
develop in your budget
and your knowledge of
your businessās
payment patterns are
combined to predict
how much and when
cash must be paid out.
14. Cash
disbursements
budgets
A schedule of the amounts
and timings of payments of
cash out of a business.
The amount of cash we will
have at the beginning of the
year is simply the amount of
cash we had at the end of
the prior year. We can get
this number from either of
two sources:
(1) the balance of our cash
account after the year end
reconciliation is complete, or
(2) the amount of cash
shown on our year-end
balance sheet.
15. The Comprehensive
Budgetāthe Pro
Forma Cash Flow
Statement
Comprehensive budgets, also
often referred to as master
budgets, are sets of budgets
that detail all projected
receipts and spending for the
budget period.
The statement of cash flows is
essentially a restatement of
the cash budget, but with the
cash coming into your
business and the cash going
out of your business placed
into the categories of cash
from operations, cash from
investing, and cash from
financing.
16.
17. Preventing
Cash Flow
Problems
ā¢ Protecting Cash from Being Stolen: Cash is the
most desired asset and easiest asset to steal
from your business.
ā¢ Techniques to Increase Cash Inflows: There are
several simple methods that can be used to
increase the amount of cash flows while
simultaneously reducing the effects of irregular
or seasonal patterns of receipts. Five proven
techniques are:
o Taking deposits and progress payments.
Cash payments received before product is
completed or delivered.
o Offering discounts for prompt payment. A
reduction in sales price provided to credit
customers for paying outstanding amounts
in a timely manner.
o Asking for your money. is at once the
most simple and the most effective way to
obtain payment from customers.
o Taking on noncore paying projects.
Revenue-producing tasks and activities
related to, but not part of, the primary
strategy of a business.
o Factoring receivables. Borrowing money
secured by a firmās accounts receivable.
18. Techniques
to
Decrease
Cash
Outflows
ā¢ Trade discounts: Percentage discounts from
gross invoice amounts provided to encourage
prompt payment.
ā¢ Noncash incentives: Rewards that do not
require payment of cash, such as stock
options, compensating time off, or added
vacation days.
ā¢ Consignment: The practice of accepting
goods for resale, without taking ownership of
them and without being responsible to pay
prior to their being sold.
ā¢ Barter: The practice of trading goods and
services without the use of money.
ā¢ Timing purchases: A method of controlling
the timing of cash outflows that is invisible to
suppliers and vendors.
ā¢ Gaming the payment process: Using
methods to appear to be paying bills on time,
when in fact payment is being delayed or
avoided.
19. Controlling
Cash
Shortages
Growth trap: A financial crisis that is
caused by a business growing faster than
it can be financed.
A survey of small business owners found
that there are at least eight strategies
employed by small businesses for
handling money shortages. These are, in
the order of their frequency of use:
1. Use personal money.
2. Borrow.
3. Adjust scheduled purchases.
4. Adjust scheduled payments.
5. Try to collect money due.
6. Sell investments.
7. Sell receivables.
8. Lay off employees.
20. Example of Money
Engineering of the
Coal Mining
ā¢ http://adaro.com/pages/read/7
/22/mining
ā¢ Corporate Structure
(bayan.com.sg)
22. Sources of
Financing
for Small Businesses
Getting the money to start or grow
a business seems like one of the
greatest challenges, but in reality,
most people who try, find the
means to get their business going.
There are two reasons for this.
First, financing is often easier than
people think because most of us
have many assets and financial
resources that we take for granted.
Second, the range of financing
resources available to us is so
varied that few people just starting
out in business know more than a
fraction of the options available to
them.
Pecking order theory of Capital Budgeting /
Project Financing
Internal:
-
-
External
-
-
-
-
23. Understanding the
Three Types of
Capital Funding
ā¢ Debt: A legal obligation to pay
money in the future.
ā¢ Equity capital: Money contributed
to the businesses in return for part
ownership of the business.
ā¢ Gift: Valuable assets or services
donated to the business without
any obligation to repay or give up
any ownership interest.
ā¢ Debt capital: Money borrowed for
the purposes of investment in a
business.
ā¢ Gift capital: Capital resources that
neither provide any ownership nor
require any repayment to the giver.
24. Financing
with Debt
ā¢ Debt is a claim on the value of
assets that a business owns.
ā¢ Secured debt provides a lender
with the right to seize specific
assets if the loan is not paid back
as specified in the loan contract.
ā¢ Unsecured debt, on the other
hand, does not give a lender the
right to seize any specific asset in
the event of non-payment.
Capital Structure = Debt + Equity
25. ā¢ Personal Equity: The amount that you may
contribute to your business from your own
resources is very much determined by how much
you are worth and how easy it is for you to use
what you have.
ā¢ Outside Equity: Outside equity is money from
selling part of your business to people who are
not and will not be involved in the management
of the business. People who buy ownership rights
in your business are considered outside equity
investors.
o Outside because they are not part of the
management of your business.
o Equity because they have legal ownership
rights to your business.
o Investors because they are letting you use
their money now in order to get wealth in the
future.
Financing
with
Equity
26. Financing
with
Equity:
Getting
Others
to Invest
in Your
Business
Equity Capital from the
Investorsā View
ā¢ Interest: A charge for the use of money,
usually figured as a percentage of the
principal.
ā¢ Gain on investment: The percentage
amount that the pay-out of an
investment differs from original cost
calculated as: (Payout ā Investment +
Dividends)/Investment.
ā¢ Dividends: Payments of profits to the
owners of corporations.
ā¢ Risk: The level of probability that an
investment will not produce expected
gains.
ā¢ Diversify: To invest in multiple
investments of differing risk profiles for
the purpose of reducing overall
investment risk.
27.
28.
29. Studi kasus dan Latihan
Pengaruh Capital Structure, Kinerja Keuangan pada
Dividend dan Nilai Perusahaan.
30. Reference:
ā¢ Katz JA, Green II RP. (2018). Entrepreneurial Small
Business. 5th Edition. McGraw Hill, New York. ā
[ESB]