韩山师范学院财务管理课件第七章 Current Asset Management.ppt

Chapter 7 Current Asset Management Chapter 7 - Outline LT 7-1 What is Current Asset Management? Cash Management Ways to Improve Collections Marketable Securities 3 Primary Variables of Credit Policy Inventory Management Level vs. Seasonal Production Economic Ordering Quantity What is Current AssetManagement? LT 7-2 Current Asset Management is essentially an extension of working capital management It is concerned with the current assets of a firm (cash, A/R, marketable securities, and inventory) A financial manager needs to remember that the less liquid an asset is, the higher the required return Cash Management LT 7-3 Financial manager wants to keep cash balances to a minimum There are 2 reasons for holding cash: – for everyday transactions (main reason) – for precautionary needs (emergencies) Goals are to speed up the inflow of cash (or improve collections) and slow down the outflow of cash (or extend disbursements) Also will attempt to “play the float” Ways to Improve Collections LT 7-4 Collection Center – speeds up collection of A/R and reduces mailing time Electronic Funds Transfer (or Wire Transfer of Funds) – a system where payments are automatically deducted from a bank account Lockbox System – when customers mail payment to a local post office box instead of to the firm Marketable Securities Treasury Bills (T-Bills) and Notes Certificates of Deposit (CDs) Banker’s Acceptances Eurodollar Certificates of Deposit Passbook Savings Accounts Money Market Funds 3 Primary Variables ofCredit Policy LT 7-6 There are 3 things to consider in deciding whether to extend credit: – Credit Standards – Terms of Trade – Collection Policy Average Collection Period Ratio of Bad Debts to Credit Sales Aging of Accounts Receivable Inventory Management LT 7-7 Inventory is divided into 3 categories: – Raw Materials – Work in Progress (WIP) or Unfinished Goods – Finished Goods There are 2 basic costs associated wit