兰大 IMBA.ppt

Current Asset Management 7 Chapter Outline Introduction to management of current assets Cash management and its importance Management of marketable securities Management of accounts receivable – credit policy decisions for maximizing profitability Inventory management – determining the level of inventory to enhance sales and profitability Liquidity and required return Introduction Companies that manage their current assets well, establish a competitive advantage Helps increase their market share Creates an increase in shareholder value through a rising stock price Requires a careful allocation of resources among the current assets of the firm: Cash Marketable securities Accounts receivable Inventory. Introduction (cont’d) In managing cash and marketable securities Primary concern should be for safety and liquidity Secondary attention should be placed on maximizing profitability In managing accounts receivable and inventory, a stiffer profitability test must be met Investment level should not be a result of happenstance or historical determination Must meet the same return-on-investment criteria applied to any decision. Different decision techniques are applied to the various forms of current assets. Cash Management Financial managers actively attempt to keep cash (non-earning asset) to a minimum It is critical to have sufficient cash to assuage emergencies To improve overall profitability of a firm: Minimize cash balances Have accurate knowledge of when cash moves in and out of the firm Reasons for Holding Cash Balances Transactions motive Payments towards planned expenses Compensating balances for banks Compensate a bank for services provided rather than paying directly for them Precautionary needs Emergency purposes Cash Flow Cycle Cash moves through a firm in a cycle Cash flow relies on: Payment pattern of customers Speed at which suppliers and creditors process checks Efficiency of the banking system Inflows and outflows of cash are to be synchronized prope