公司理财教师手册、英文答案课件chap

1、Short-Term Finance and PlanningKey Concepts and SkillsUnderstand the components of the cash cycle and why it is importantUnderstand the pros and cons of the various short-term financing policiesBe able to prepare a cash budgetUnderstand the various options for short-term financingChapter Outline26.1

2、 Tracing Cash and Net Working Capital26.2 Defining Cash in Terms of Other Elements26.3 The Operating Cycle and the Cash Cycle26.4 Some Aspects of Short-Term Financial Policy26.5 Cash Budgeting26.6 The Short-Term Financial Plan26.1 Tracing Cash and Net Working CapitalCurrent Assets are cash and other

3、 assets that are expected to be converted to cash within the year.CashMarketable securitiesAccounts receivableInventoryCurrent Liabilities are obligations that are expected to require cash payment within the year.Accounts payableAccrued wagesTaxesBalance Sheet Model of the FirmHow much short-term ca

4、sh flow does a company need to pay its bills?Net Working CapitalCurrent AssetsFixed Assets1. Tangible 2. IntangibleShareholders EquityCurrent LiabilitiesLong-Term Debt26.2 Defining Cash in Terms of Other ElementsNet Working Capital+Fixed Assets=Long-Term Debt+EquityNet Working Capital=CashOther Curr

5、ent AssetsCurrent Liabilities+Cash=Long-Term Debt+EquityNet Working Capital (excluding cash)Fixed AssetsDefining Cash in Terms of Other ElementsAn increase in long-term debt and or equity leads to an increase in cashas does a decrease in fixed assets or a decrease in the non-cash components of net w

6、orking capital.The sources and uses of cash follow from this reasoning.Cash=Long-Term Debt+EquityNet Working Capital (excluding cash)Fixed Assets26.3 The Operating Cycle and the Cash CycleTimeAccounts payable periodCash cycleOperating cycleCash received Accounts receivable periodInventory periodFini

7、shed goods soldFirm receives invoiceCash paid for materialsOrder PlacedStock ArrivesRaw material purchasedThe Operating Cycle and the Cash CycleIn practice, the inventory period, the accounts receivable period, and the accounts payable period are measured by days in inventory, days in receivables, a

8、nd days in payables. Cash cycle=Operating cycleAccounts payable periodExampleInventory:Beginning = 200,000Ending = 300,000Accounts Receivable:Beginning = 160,000Ending = 200,000Accounts Payable:Beginning = 75,000Ending = 100,000Net sales = 1,150,000Cost of Goods sold = 820,000ExampleInventory period

9、Average inventory = (200,000+300,000)/2 = 250,000Inventory turnover = 820,000 / 250,000 = 3.28 timesInventory period = 365 / 3.28 = 111.3 daysReceivables periodAverage receivables = (160,000+200,000)/2 = 180,000Receivables turnover = 1,150,000 / 180,000 = 6.39 timesReceivables period = 365 / 6.39 =

10、57.1 daysOperating cycle = 111.3 + 57.1 = 168.4 daysExamplePayables PeriodAverage payables = (75,000+100,000)/2 = 87,500Payables turnover = 820,000 / 87,500 = 9.37 timesPayables period = 365 / 9.37 = 38.9 daysCash Cycle = 168.4 38.9 = 129.5 daysWe have to finance our inventory for 129.5 days.If we w

11、ant to reduce our financing needs, we need to look carefully at our receivables and inventory periods they both seem excessive.26.4 Some Aspects of Short-Term Financial PolicyThere are two elements of the policy that a firm adopts for short-term finance.The size of the firms investment in current as

12、sets, usually measured relative to the firms level of total operating revenues.Flexible RestrictiveAlternative financing policies for current assets, usually measured as the proportion of short-term debt to long-term debt.Flexible RestrictiveSize of Investment in Current AssetsA flexible short-term

13、finance policy would maintain a high ratio of current assets to sales.Keeping large cash balances and investments in marketable securitiesLarge investments in inventoryLiberal credit termsA restrictive short-term finance policy would maintain a low ratio of current assets to sales.Keeping low cash b

14、alances, no investment in marketable securitiesMaking small investments in inventoryAllowing no credit sales (thus no accounts receivable)Carrying Costs and Shortage Costs$Investment in Current Assets ($)Shortage costsCarrying costsTotal costs of holding current assets.CA*Minimum pointAppropriate Fl

15、exible Policy$Investment in Current Assets ($)Shortage costsCarrying costsTotal costs of holding current assets.CA*Minimum pointAppropriate Restrictive Policy$Investment in Current Assets ($)Shortage costsCarrying costsTotal costs of holding current assets.CA*Minimum pointAlternative Financing Polic

16、iesA flexible short-term finance policy means a low proportion of short-term debt relative to long-term financing.A restrictive short-term finance policy means a high proportion of short-term debt relative to long-term financing.In an ideal world, short-term assets are always financed with short-ter

17、m debt, and long-term assets are always financed with long-term debt.In this world, net working capital is zero.26.5 Cash BudgetingA cash budget is a primary tool of short-run financial planning.The idea is simple: Record the estimates of cash receipts and disbursements. Cash ReceiptsArise from sale

18、s, but we need to estimate when we actually collectCash Outflow Payments of Accounts PayableWages, Taxes, and other ExpensesCapital ExpendituresLong-Term Financial PlanningExamplePet Treats Inc. specializes in gourmet pet treats and receives all e from salesSales estimates (in millions)Q1 = 500; Q2

19、= 600; Q3 = 650; Q4 = 800; Q1 next year = 550Accounts receivableBeginning receivables = $250Average collection period = 30 daysAccounts payablePurchases = 50% of next quarters salesBeginning payables = 125Accounts payable period is 45 daysOther expensesWages, taxes and other expense are 30% of sales

20、Interest and dividend payments are $50A major capital expenditure of $200 is expected in the second quarterThe initial cash balance is $80 and the company maintains a minimum balance of $50ExampleACP = 30 days, this implies that 2/3 of sales are collected in the quarter made, and the remaining 1/3 a

21、re collected the following quarter.Beginning receivables of $250 will be collected in the first quarter.Q1Q2Q3Q4Beginning Receivables250167200217Sales500600650800Cash Collections583567633750Ending Receivables167200217267ExamplePayables period is 45 days, so half of the purchases will be paid for eac

22、h quarter, and the remaining will be paid the following quarter.Beginning payables = $125Q1Q2Q3Q4Payment of accounts275313362338Wages, taxes and other expenses150180195240Capital expenditures200Interest and dividend payments50505050Total cash disbursements475743607628ExampleQ1Q2Q3Q4Total cash collections583567633750Total cash disbursements475743607628 Net cash inflow108-17626122Beginning Cash Balance80188123