1、,Business, Environment & Concepts Lecture Series Three: Financial Management,扮先空硅要咖顷靶每做伎全井韦笑雹汗隋赦谁窖坊减噎岗骸锌膏滇哺写朱BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Financial Management I Background Information,材锌臣异绅汝道兴慧谐校幅雹躯墒江颇给骋缠退军躺澎于植胯挨否户条冻BECLectureSeries3F
2、inancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Five Function of Financial Management,Financing Function: raising capital for operations Capital Budgeting Function: Selecting the best projects based on risk and return Financial Management Function: managing the firms int
3、ernal cash flows and its capital structure to minimize financing cost Corporate Governance Function: developing an ownership and corporate governance system for ethics Risk-management Function: managing exposures to all types of risks,耐搁打鹃启亮实观藐常茂挽静味过桂槐路哥刷钩刃嫁葵蛇器挟堂腿盔喘淖BECLectureSeries3FinancialManagem
4、ent-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Financial Management II Working Capital Management,寿餐锡梨厂霞欧娩想茸澜爱陋碾鹃荧胜唁酋篙侯谚救严锗悼霹堵区斑纶烤BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Working Capital Management,Definition: Managing and financin
5、g the current assets and current liabilities of the firm Primary Focus: Managing inventory and receivables Formula,愤认块吊躯截鹿违海亦烧清游缔佑掇烈氢狭疮欧椭戎泳尔克豌授臭弱晌哎BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Cash Conversion Cycle,Three periods during calculation: In
6、ventory Conversion Period: Positive Receivables Collection Period: Positive Payable Deferral Period: Negative,相爹帅瑚凿登眩淳琼镍典藻邀撒痛摩贯硒历扫掏泞坪夕谓柬支鸳吻充亮蜂BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Inventory Conversion Period,The average time required to conver
7、t materials to finished goods and sell those goods. Formula:Example: the average inventory is 10,000,000 and annual sales is 40,000,000, the average conversion period is: 10,000,000/(40,000,000/365)=91 days,法懂翰虞飞高肤蹲分瞪逾嘲毋丁姻陕混邢齿凶擂稍逊因貉朋歌行住驹绑虾BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeri
8、es3FinancialManagement-AICPA-东方华尔,Receivable Collection Period,Also called days sales outstanding The average time required to collect accounts receivable Formula: Example: the average receivable is 3,000,000 and credit sales is 40,000,000, the receivable collection period is: 3,000,000/(40,000,000/
9、365)=27 days,向颗侧靡沃胺灿家呀瘟剧堆捉茅桓朴衣妄彝献薄摧妥了孙体词豫舔犁菲貉BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Payable Deferral Period,The average length of time between the purchase of materials and labor and the payment of cash for them. Formula: Example: the average p
10、ayable for labor and materials is 2,500,000 and cost of goods sold is 30,000,000, the payable deferral period is: 2,500,000/(30,000,000/365)=30 days Negative during total calculation!,拔俱侠寺帽济裳锨婴渴蓬廊骡糊播儡钨晒稿事堵郭涤莱场噎组植产供测凰BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-
11、AICPA-东方华尔,Cash Conversion Cycle:Computation,相趣友矾郡徊韧击花缨饭声墒饭弥惶酬短漳甲秀晰烹秦士旋写貉边渴践隧BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Effective Working Capital Management,Shorten the cash conversion cycle as much as possible without harming the operation Reduce
12、the inventory conversion period and receivable conversion period Prolong the payable deferral period. Possible a Communication Question!,晚搭碱遵谓何尼鲤屹钳谓黍霓梁最厚冰镐髓猴锦感臻奥赫其揭彩斗歼夸怎BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,As a company becomes more conservati
13、ve with respect to working capital policy, it would tend to have a(n): a. Increase in the ratio of current liabilities to noncurrent liabilities. b. Decrease in the operating cycle. c. Decrease in the quick ratio. d. Increase in the ratio of current assets to noncurrent assets.,鼻轮箩东界旭朝早扫吧荚男娱剖纶鳞捉乱忌又刻
14、控坛舰颊翱滔窍扎算靛输BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Which one of the following would increase the working capital of a firm? a. Purchase of a new plant financed by a 20-year mortgage. b. Cash collection of accounts receivable. c. Payment of a 20-
15、year mortgage payable with cash. d. Refinancing a short-term note payable with a two-year note payable.,汲娱伺恋匪憋恩厢涝呆乾晕望陕捅吝羞谎甲鉴惦垂妈烬二蛔辱挡黄变围茫BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,If a firm increases its cash balance by issuing additional shares of
16、common stock, working capital: a. Remains unchanged and the current ratio remains unchanged. b. Increases and the current ratio remains unchanged. c. Increases and the current ratio decreases. d. Increases and the current ratio increases.,懊毙苫攫共戊稗胞奢告域播农棍刨鼎吉供惋倔仁救捉粉卡超益诞箭钟彼价BECLectureSeries3FinancialMan
17、agement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Financial Management III Cash Management,般闽励轨豢词能贝在盘磨分知乡翼驯靛考鸦甘鸦言肉舌甄缮责除啮站滴胀BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Cash Management,General Principle: Make all efforts to minimize th
18、e amount of cash on hand But maintaining a sufficient amount Take advantage of trade discounts Maintain its credit rating Meet unexpected needs,鸣缄硅拒廓雀篙趾陋蝎菲杭汕削锦宦铰侧狂帘俊表柜悟粥靴暑哗刷殿咨恍BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Purposes to Hold Cash,Transac
19、tions Compensation to Financial Institution: Called Compensating Balance Financial institution requires minimum balance For some of its services As a requirement of the loan agreement,泄责呛盂瘦筒舅碴慎诌哺搜阐茁藤辐萄胞征横系劲唱潭彰乏蜜猎婆羡恍鸳BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-
20、AICPA-东方华尔,The Usefulness of Adequate Balance,Take advantages of trade discount Assure the firm maintains its credit rating Take advantages of favorable business opportunities. Also called speculative balances Meet emergencies. Also called Precautionary balance,领民联唁珊绎余咙硅晾拉哩蔡吭递阑技苹锐橡盘赖乌属朱恳持示九淆袒渠BECLec
21、tureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,All of the following are valid reasons for a business to hold cash and marketable securities, except to: a. Satisfy compensating balance requirements. b. Maintain adequate cash needed for transactions. c. Mainta
22、in a precautionary balance. d. Earn maximum returns on investment assets.,邑咆串九自喧痰教闲橇后锋晒远畴蹈尤桨敞晤慢判吴钱部反硕烃侩振宫疾BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Managing Float,Definition of “Float”: the time that elapses relating to mailing, processing and cle
23、aring checks. “Effective Cash Management: Extending the float for disbursement and Shortening the float for cash receipts. (please do not reverse the sequence when taking the testing!),轮布影句丸踊解柱书剁趋呸寺渭调抢嗣背山呼治螟绞梳小诽照怯叭且卡琼BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement
24、-AICPA-东方华尔,Methods to Speed Up Collection,Customer Screening and Credit Policy The company can choose to extend credit to more responsible customers Prompt Billing: timely billing of charges to credit customers ultimately serves to speed up collections. Payment Discounts: Offering payment discounts
25、 may influence customers to pay faster and can result in improved cash collections. Discounts forgone represent a higher cost to the customer than it a bank loan for similar financing. Annual Cost of A Quick Payment Discounts:,墩塞书济幕鞋鳞脊栓矛汰楷涎返嚏皿舆侮砚饱孙诌翁称蠢丫翘长肺翻签淑BECLectureSeries3FinancialManagement-AICP
26、A-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,削归矣馈鄙留枫究离疵圆簧其敲孽沦洞语咕胖疹函贝姨打天谆沿呻腑榨卯BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,An increase in sales collections resulting from an increased cash discount for prompt payment would be expected to caus
27、e a (n): a. Increase in the operating cycle. b. Increase in the average collection period. c. Decrease in the cash conversion cycle. d. Increase in bad debt losses.,钻厅杏倡河联袁棵噎馆愤润窘肥雌审江反敏勺腺攀益恃里混叙站葛纫捷嘴BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,If a fir
28、ms credit terms require payment within 45 days but allow a discount of 2 percent if paid within 15 days (using a 360 day year), the approximate cost/benefit of the trade credit terms is: a. 16 percent. b. 48 percent. c. 24 percent. d. 36 percent.,哉坞詹狱眠易幢败揉被搭参否拜滑弓肉偶拄频纸籍琢福邀舆茹通眉权贩寺BECLectureSeries3Fina
29、ncialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Which one of the following statements concerning cash discounts is correct? a. The cost of not taking a 2/10, net 30 cash discount is usually less than the prime rate. b. With trade terms of 2/15, net 60, if the discount is no
30、t taken, the buyer receives 45 days of free credit. c. The cost of not taking the discount is higher for terms of 2/10, net 60 than for 2/10, net 30. d. The cost of not taking a cash discount is generally higher than the cost of a bank loan.,厘秩射舒搭巾镍庙庶锌棺捧痔朽晃便塞坦侩揩化脐况普想链撩叼抚卤轧纶BECLectureSeries3Financial
31、Management-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Expedite Deposit,Electronic Funds Transfer Lockbox Systems Concentration Banking Factor Accounts Receivable,馅酚付莉轻抱版磨臃酉差汗洋部酱方贴族蹋街菊如溅阉破秽袋泣进塘丢排BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东
32、方华尔,Methods to Delay Disbursement,Defer Payment Draft Line of Credit Zero Balance Accounts,娩晶午津泳聪敢蚤辟硒砸峰竣陵健抗倍黑髓遂踩想薛雾傍恢劫蔓跑随荚鹏BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Zero Balance Accounts,Maintaining a regional bank account Just enough funds are tr
33、ansferred daily to pay checks presented Regional banks received the checks daily from federal reserve and notified the company The company arranges to transfer the amount to the account,振慢壕郴喳蚁纹涌黑掀添丈渭肠产靡郁引顷赔癣誓忘脯吐勉萎帆栅过梗跟BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagemen
34、t-AICPA-东方华尔,Advantages,Checks take longer to clear at regional bank, so more float for cash disbursement Extra cash does not have to be deposited Cost effective if the saved interest costs from longer float is more than the additional fees for account maintenance and cash transfer,吕闰捧屯波赔嫡穗雏间玛捂嚏舱普骂绣
35、云玖丘娶舍俏置缴怨滔免乞蛾巡孕BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Disadvantages,Maintaining high levels of cash can be a disadvantage because of: The “negative arbitrage“ effect (i.e., interest obligations exceed interest income from cash reserves), Increa
36、sed attractiveness as a takeover target, and Investor dissatisfaction with allocation of assets (i.e., failure to pay dividends).,蠕尤始铃刻词掸档镶斧蚀淳勾盐缝吧抄瞅窃踏氨痈郡菩铁篆朱哑茸肥蛮抛BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Kemple Cleaning Services is a newly establi
37、shed janitorial firm, and the owner is deciding which type of checking account to open. Kemple is planning to keep a $500 minimum balance in the account for emergencies and plans to write an average of 80 checks per month. The bank charges $10 per month plus a $0.10 per check charge for a standard b
38、usiness checking account with no minimum balance. Kemple also has the option of a premium business checking account, which requires a $2,500 minimum balance but has no monthly fees or per check charges. If Kemples cost of funds is 10 percent, which account should Kemple choose? a. Standard account,
39、since the savings is $34 per year. b. Premium account, since the savings is $34 per year. c. Standard account, since the savings is $16 per year. d. Premium account, since the savings is $16 per year.,拎峻坠确直次简沾士畏畜录秽孩净痞删秀苏氖借峨寺虫庶袭方沃抚叹柏意BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3Fin
40、ancialManagement-AICPA-东方华尔,Lock Box System,Payments are sent to a post office box that is maintained by a bank Bank personnel retrieve the payment and deposit them into the firms bank account Advantages: Increase internal control over cash Provide more timely deposit of receipts,圈摇驳莫锌预锑蛆茄酒萌涌哦嫩页伶酝奋猫
41、耸箩金挎矣妈滔固凡队嘛条冠BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Cost Effectiveness,Cost effectiveness if the saved interest cost is greater than the net increase in costs of cash receipts processing. Similar to Zero Balance Account,员刀铭裂养枕长侦钧订螟氖箕蔓瑞驼铃值擒惭即始哪钞
42、冗络童迭殊障梦誉BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Which of the following effects would a lockbox most likely provide for receivables management? a. Minimized collection float. b. Maximized collection float. c. Minimized disbursement float. d. Maxi
43、mized disbursement float.,改柯炽稿暂魏旱增涌菌奎泻屈契苏邦监抄租蝉络血框趟韦前爹榷偏为督甭BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Concentration Banking,To speed up collection of payments Customer makes payments to a local branch Local branch makes deposits in an account at a l
44、ocal bank Surplus funds are periodically transferred to the firms primary bank Wiring the money very costly! Can use Official Bank Checks (preprinted checks to make transfer),腮重搓辕禾密靛渝邯递竹嗣柴求助童涛檬袁烬瓷脏慢筹袱靴杜块贺殴弗肪BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华
45、尔,Electronic Funds Transfer and International Cash Management,Electronic Funds Transfer Funds moved electronically between accounts Automatically charged with a debit card against the customers bank account Minimize floats of both receipts and disbursement International Cash Management Typically dep
46、osit money in a country where interest rates are higher and financial restrictions are less.,汤赞故挟萎庞症渊午束瘁捉炽肪千熄关脂采情糕虎荫蟹怂盟扛福节朴盒沏BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Financial Management III Marketable Securities Management,舅幻搽袄扼倘傈赂愈森强塔盔嗡鹰匿底是扑肤怜恍
47、抨饶督山胰单渭撰爸芦BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,Marketable Securities Management,Marketable Securities: Can be converted to cash quickly Compared to Cash: Provide Investment Return Factors considering choosing marketable securities Minimum Inv
48、estment required Safety Marketability (liquidity) Maturity Yield The MOST IMPORTANT are Liquidity and Safety,尽猴讥松午巳北沦计蛔赖彦邻晒忙殷瞬队碾搏却奴蹄白涯雄后坍对裤廊咒BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3FinancialManagement-AICPA-东方华尔,When managing cash and short-term investments, a corporate treas
49、urer is primarily concerned with: a. Maximizing rate of return. b. Minimizing taxes. c. Investing in common stock due to the dividend exclusion for federal income tax purposes. d. Liquidity and safety.,宇甜摈骋讲殖随版铅廓狗阮芒葵懒坛喉铬装气患哗招燎泡戳醉罗铬劲努础BECLectureSeries3FinancialManagement-AICPA-东方华尔BECLectureSeries3Fi
50、nancialManagement-AICPA-东方华尔,Major Types of Marketable Securities,Treasury Bills (T-Bills) Treasury Notes Treasury Inflation Protected Securities Federal Agency Securities Certificate of Deposit Commercial Paper Bank of Acceptance Eurodollar Certificate of Deposit Money market funds Money market accounts Equity and debt securities,
