CH16ManagingCurrentAssets(财务管理,英文版)

1、,CHAPTER16ManagingCurrentAssets,AlternativeworkingcapitalpoliciesCashmanagementInventorymanagementAccountsreceivablemanagement,Definitions,GrossW.C.:Totalcurrentassets.NetW.C.:CurrentassetsCurrentliabilities.W.C.Policy:Decisionsasto(1)thelevelofeachtypeofcurrentasset,and(2)howcurrentassetswillbefina

2、nced.W.C.Management:Controllingcash,inventories,andA/R,plusS-Tliabilitymanagement.,SKIappearstohavelargeamountsofworkingcapitalgivenitslevelofsales.,SelectedRatios-SKIInc.,SKIIndustryCurrent1.75x2.25xQuick0.83x1.20 xDebt/Assets58.76%50.00%Turnoverofcash&securities16.67x22.22xDSO(days)45.0032.00Inv.t

3、urnover4.82x7.00 xF.A.turnover11.35x12.00 xT.A.turnover2.08x3.00 xProfitmargin2.07%3.50%ROE10.45%21.00%,HowdoesSKIsworkingcapitalpolicycomparewiththeindustry?,Workingcapitalpolicyisreflectedincurrentratio,quickratio,turnoverofcashandsecurities,inventoryturnover,andDSO.TheseratiosindicateSKIhaslargea

4、mountsofworkingcapitalrelativetoitslevelofsales.SKIiseitherveryconservativeorinefficient.,IsSKIinefficientorjustconservative?,Aconservative(relaxed)policymaybeappropriateifitleadstogreaterprofitability.However,SKIisnotasprofitableastheaveragefirmintheindustry.Thissuggeststhecompanyhasexcessiveworkin

5、gcapital.,CashConversionCycle,Cashdoesntearnaprofit,sowhyholdit?,1.Transactions:Musthavesomecashtooperate.2.Precaution:“Safetystock.”Butlessenedbylineofcredit,marketablesecurities.3.Compensatingbalances:Forloansand/orservicesprovided.4.Speculation:Totakeadvantageofbargains,totakediscounts,etc.Reduce

6、dbycreditlines,securities.,Whatsthegoalofcashmanagement?,Tomeetaboveobjectives,especiallytohavecashfortransactions,yetnothaveanyexcesscash.Tominimizetransactionsbalancesinparticular,andalsoneedsforcashtomeetotherobjectives.,WaystoMinimizeCashHoldings,Usealockbox.Insistonwiretransfersfromcustomers.Sy

7、nchronizeinflowsandoutflows.Usearemotedisbursementaccount.,(More),Increaseforecastaccuracytoreduceneedfor“safetystock”ofcash.Holdmarketablesecurities(alsoreducesneedfor“safetystock”).Negotiatealineofcredit(alsoreducesneedfor“safetystock”).,Whatis“Float”andhowisitaffectedbythefirmscashmanager?,Floati

8、sthedifferencebetweencashasshownonthefirmsbooksandonitsbanksbooks.IfSKIcollectschecksin2daysbutthosetowhomSKIwriteschecksdontprocessthemfor6days,thenSKIwillhave4daysofnetfloat.,(More),Ifafirmwith4daysofnetfloatwritesandreceives$1millionofchecksperday,itwouldbeabletooperatewith$4millionlesscapitaltha

9、nifithadzeronetfloat.,CashBudget:ThePrimaryCashManagementTool,Purpose:Forecastscashinflows,outflows,andendingcashbalances.Usedtoplanloansneededorfundsavailabletoinvest.Timing:Daily,weekly,ormonthly,dependinguponpurposeofforecast.Monthlyforannualplanning,dailyforactualcashmanagement.,DataRequiredforC

10、ashBudget,1.Salesforecast.2.Informationoncollectionsdelay.3.Forecastofpurchasesandpaymentterms.4.Forecastofcashexpenses,taxes,etc.5.Initialcashonhand.6.Targetcashbalance.,SKIsCashBudgetforJanuaryandFebruary,NetCashInflowsJanuaryFebruaryCollections$67,651.95$62,755.40Purchases44,603.7536,472.65Wages6

11、,690.565,470.90Rent2,500.002,500.00Totalpayments$53,794.31$44,443.55NetCF$13,857.64$18,311.85,CashBudget(Continued),JanuaryFebruaryCashatstartifnoborrowing$3,000.00$16,857.64NetCF(slide15)13,857.6418,311.85Cumulativecash$16,857.64$35,169.49Less:targetcash1,500.001,500.00Surplus$15,357.64$33,669.49,S

12、houlddepreciationbeexplicitlyincludedinthecashbudget?,No.Depreciationisanoncashcharge.Onlycashpaymentsandreceiptsappearoncashbudget.However,depreciationdoesaffecttaxes,whichappearinthecashbudget.,Whataresomeotherpotentialcashinflowsbesidescollections?,Proceedsfromthesaleoffixedassets.Proceedsfromsto

13、ckandbondsales.Interestearned.Courtsettlements.,Howcaninterestearnedorpaidonsurplus/loanbeincorporatedinthecashbudget?,Interestearned:Addlineinthecollectionssection.Interestpaid:Addlineinthepaymentssection.Foundasinterestratexsurplus/loanpartofcashbudgetforprecedingmonth.Note:Interestonanyotherdebtw

14、ouldneedtobeincorporatedaswell.,Howcouldbaddebtsbeworkedintothecashbudget?,Collectionswouldbereducedbytheamountofthebaddebtlosses.Forexample,ifthefirmhad3%baddebtlosses,collectionswouldtotalonly97%ofsales.Lowercollectionswouldleadtohigherborrowingrequirements.,SKIsforecastedcashbudgetindicatesthatth

15、ecompanyscashholdingswillexceedthetargetedcashbalanceeverymonth,exceptforOctoberandNovember.,Cashbudgetindicatesthecompanyisholdingtoomuchcash.SKIcouldimproveitsEVAbyeitherinvestingcashinmoreproductiveassets,orbyreturningcashtoitsshareholders.,WhatreasonsmightSKIhaveformaintainingarelativelyhighamou

16、ntofcash?,Ifsalesturnouttobeconsiderablylessthanexpected,SKIcouldfaceacashshortfall.Acompanymaychoosetoholdlargeamountsofcashifitdoesnothavemuchfaithinitssalesforecast,orifitisveryconservative.Thecashmaybeused,inpart,tofundfutureinvestments.,CategoriesofInventoryCosts,CarryingCosts:Storageandhandlin

17、gcosts,insurance,propertytaxes,depreciation,andobsolescence.OrderingCosts:Costofplacingorders,shippingandhandlingcosts.,(More),CostsofRunningShort:Lossofsales,lossofcustomergoodwill,andthedisruptionofproductionschedules.,Reducingtheaverageamountofinventorygenerallyreducescarryingcosts,increasesorder

18、ingcosts,andmayincreasethecostsofrunningshort.,IsSKIholdingtoomuchinventory?,SKIsinventoryturnover(4.82)isconsiderablylowerthantheindustryaverage(7.00).Thefirmiscarryingalotofinventoryperdollarofsales.Byholdingexcessiveinventory,thefirmisincreasingitscosts,whichreducesitsROE.Moreover,thisadditionalw

19、orkingcapitalmustbefinanced,soEVAisalsolowered.,IfSKIreducesitsinventory,withoutadverselyaffectingsales,whateffectwillthishaveonitscashposition?,Shortrun:Cashwillincreaseasinventorypurchasesdecline.Longrun:Companyislikelytotakestepstoreduceitscashholdings.,DoSKIscustomerspaymoreorlesspromptlythantho

20、seofitscompetitors?,SKIsDSO(45days)iswellabovetheindustryaverage(32days).SKIscustomersarepayinglesspromptly.SKIshouldconsidertighteningitscreditpolicyinordertoreduceitsDSO.,1.CreditPeriod:Howlongtopay?ShorterperiodreducesDSOandaverageA/R,butitmaydiscouragesales.2.CashDiscounts:Lowersprice.AttractsnewcustomersandreducesDSO.3