韩山师范学院财务管理课件第六章 Working Capital and the Financing Decision.ppt

Chapter 6 Working Capital and theFinancing Decision Chapter 6 - Outline LT 6-1 What is Working Capital Management? Term Structure of Interest Rates U.S. Government Securities Short-Term vs. Long-Term Financing Working Capital Financing Plans Working Capital Management LT 6-2 Working Capital Management is controlling and managing the current assets of a firm Most time-consuming job of a financial manager Crucial to long-term success or failure of a business Term Structure of Interest Rates LT 6-3 The Term Structure of Interest Rates is also known as the Treasury Yield Curve Graph showing the relationship between S/T and L/T interest rates at different maturities Normal shape is an upward sloping curve, indicating that L/T interest rates are greater than S/T interest rates U.S. Government Securities LT 6-4 Treasury Bills (T-Bills) = short-term IOUs 3 months to 1 year in maturity Treasure Notes = intermediate term 1 to 10 years in maturity Treasury Bonds = long term 10 to 40 years in maturity Short-Term vs. Long-TermFinancing LT 6-5 Short-term financing is less expensive but riskier Long-term financing is more expensive but less risky (or safer) Firm must decide the appropriate “mix” Similar to the risk-return trade-off Working Capital Financing Plans LT 6-6 An aggressive (risky) firm: – S/T financing and low liquidity A conservative (safe or cautious) firm: – L/T financing and high liquidity A moderate (balanced) firm: – S/T financing and high liquidity OR – L/T financing and low liquidity An appropriate strategy is determined based on the company’s tolerance for risk McGraw-Hill/Irwin ? 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. PPT 6-1 FIGURE 6-1 The nature ofasset growth PPT 6-2 TABLE 6-1 Yawakuzi sales forecast(in units) PPT 6-3 TABLE 6-2 Yawakuzi’s productionschedule and inventory PPT 6-4 TABLE 6-3 Sales forecast, cash receipts and payments,and cash budget PPT 6-5 TABLE 6-4 T