财务管理英文版

Chapter6FinancialStatementAnalysis©PearsonEducationLimited2004FundamentalsofFinancialManagement,12/eCreatedby:GregoryA.Kuhlemeyer,Ph.D.CarrollCollege,Waukesha,WI1Financial

StatementAnalysisFinancialStatementsAPossibleFrameworkforAnalysisBalanceSheetRatiosIncomeStatementandIncomeStatement/BalanceSheetRatiosTrendAnalysisCommon-SizeandIndexAnalysis2ExamplesofExternalUsesofStatementAnalysisTradeCreditors

--Focusontheliquidityofthefirm.Bondholders

--Focusonthelong-termcashflowofthefirm.Shareholders

--Focusontheprofitabilityandlong-termhealthofthefirm.3ExamplesofInternal

UsesofStatementAnalysisPlan

--Focusonassessingthecurrentfinancialpositionandevaluatingpotentialfirmopportunities.Control

--Focusonreturnoninvestmentforvariousassetsandassetefficiency.Understand--Focusonunderstandinghowsuppliersoffundsanalyzethefirm.4Ⅰ.PrimaryTypesofFinancialStatementsIncomeStatementAsummaryofafirm’srevenuesandexpensesoveraspecifiedperiod,endingwithnetincomeorlossfortheperiod.BalanceSheetAsummaryofafirm’sfinancialpositiononagivendatethatshowstotalassets=totalliabilities+owners’equity.5BasketWonders’BalanceSheet(AssetSide)a.Howthefirmstandsonaspecificdate.b.WhatBWowned. c.Amountsowedbycustomers.d.Futureexpenseitemsalreadypaid.e.Cash/likelyconvertibletocashwithin1year.f.Originalamountpaid.g.Acc.deductionsforwearandtear.CashandC.E. $90Acct.Rec.c 394Inventories 696PrepaidExp

d 5AccumTaxPrepay

10

CurrentAssetse$1,195FixedAssets(@Cost)f1030Less:Acc.Depr.g (329)

NetFix.Assets

$701Investment,LT

50OtherAssets,LT 223

TotalAssets b$2,169BasketWondersBalanceSheet(thousands)Dec.31,2007a6BasketWonders’BalanceSheet(LiabilitySide)a.Note,Assets=Liabilities+Equity.b.WhatBWowedandownershipposition. c.Owedtosuppliersforgoodsandservices.d.Unpaidwages,salaries,etc.e.Debtspayable<1year.f.Debtspayable>1year.g.Originalinvestment.h.Earningsreinvested.NotesPayable $ 290Acct.Payablec 94AccruedTaxes

d 16OtherAccruedLiab.

d

100

CurrentLiab.

e$500Long-TermDebt

f

530

Shareholders’Equity Com.Stock($1par)

g

200

AddPdinCapital

g 729RetainedEarnings

h

210

TotalEquity $1,139

TotalLiab/Equitya,b$2,169BasketWondersBalanceSheet(thousands)Dec.31,20077BasketWonders’IncomeStatementa.Measuresprofitabilityoveratimeperiod.b.Received,orreceivable,fromcustomers. c.Salescomm.,adv.,officers’salaries,etc.d.Operatingincome.e.Costofborrowedfunds.f.Taxableincome.g.Amountearnedforshareholders.NetSales $2,211CostofGoodsSold

b

1,599 GrossProfit

$612SG&AExpensesc

402

EBITd

$210InterestExpensee

59

EBTf

$

151

IncomeTaxes

60

EATg

$91CashDividends 38IncreaseinRE

$53BasketWondersStatementofEarnings(inthousands)forYearEndingDecember31,2007a8Ⅱ.FrameworkforFinancialAnalysisNegotiationswithsuppliersofcapital.Determiningthefinancingneedsofthefirm.1.Analysisofthefundsneedsofthefirm.2.Analysisofthefinancialconditionandprofitabilityofthefirm.3.Analysisofthebusinessriskofthefirm.9Ⅲ.UseofFinancialRatiosTypesofComparisonsInternalComparisonsExternalComparisonsAFinancialRatioisanindexthatrelatestwo

accounting

numbersandisobtainedbydividingonenumberbytheother.10ExternalComparisonsandSourcesofIndustryRatiosExamples:RiskManagementAssociationDun&BradstreetAlmanacofBusinessandIndustrialFinancialRatiosThisinvolvescomparingtheratiosofonefirmwiththoseofsimilarfirmsorwithindustryaverages.Similarityisimportantasoneshouldcompare“applestoapples.”111.LiquidityRatios(1)CurrentCurrentAssetsCurrentLiabilitiesForBasketWondersDecember31,2007Showsafirm’sabilitytocoveritscurrentliabilitieswithitscurrentassets.BalanceSheetRatiosLiquidityRatios$1,195$500=2.3912LiquidityRatios(2)Acid-Test(Quick)CurrentAssets-InvCurrentLiabilitiesForBasketWondersDecember31,2007Showsafirm’sabilitytomeetcurrentliabilitieswithitsmostliquidassets.BalanceSheetRatiosLiquidityRatios$1,195-$696$500=1.0013SummaryoftheLiquidityRatioComparisonsStrongcurrentratioandweakacid-testratioindicatesapotentialproblemintheinventoriesaccount.Notethatthisindustryhasarelativelyhighlevelofinventories.

Ratio

BW

IndustryCurrent 2.39 2.15Acid-Test 1.00 1.2514SummaryoftheLiquidityTrendAnalysesThecurrentratiofortheindustryhasbeenrisingslowlyatthesametimetheacid-testratiohasbeenrelativelystable.ThisindicatesthatinventoriesareasignificantproblemforBW.ThecurrentratioforBWhasbeenrisingatthesametimetheacid-testratiohasbeendeclining.152.FinancialLeverageRatios(1)Debt-to-EquityTotalDebtShareholders’EquityForBasketWondersDecember31,2007Showstheextenttowhichthefirmisfinancedbydebt.BalanceSheetRatiosFinancialLeverageRatios$1,030$1,139=.9016FinancialLeverageRatios(2)Debt-to-Total-AssetsTotalDebtTotalAssetsForBasketWondersDecember31,2007Showsthepercentageofthefirm’sassetsthataresupportedbydebtfinancing.BalanceSheetRatiosFinancialLeverageRatios$1,030$2,169=.47173.CoverageRatiosInterestCoverageEBITInterestChargesForBasketWondersDecember31,2007Indicatesafirm’sabilitytocoverinterestcharges.IncomeStatementRatiosCoverageRatios$210$59=3.5618SummaryoftheCoverageTrendAnalysisThisindicatesthatlowearnings(EBIT)maybeapotentialproblemforBW.Note,weknowthatdebtlevelsareinlinewiththeindustryaverages.TheinterestcoverageratioforBWhasbeenfallingsince2005.Ithasbeenbelowindustryaveragesforthepasttwoyears.194.ActivityRatios(1)ReceivableTurnoverAnnualNetCreditSalesReceivablesForBasketWondersDecember31,2007Indicatesqualityofreceivablesandhowsuccessfulthefirmisinitscollections.IncomeStatement/BalanceSheetRatiosActivityRatios$2,211$394=5.61(Assumeallsalesarecreditsales.)20ActivityRatiosAvgCollectionPeriodDaysintheYearReceivableTurnoverForBasketWondersDecember31,2007Averagenumberofdaysthatreceivablesareoutstanding.(orRTindays)IncomeStatement/BalanceSheetRatiosActivityRatios3655.61=65days21ActivityRatios(2)PayableTurnover(PT)AnnualCreditPurchasesAccountsPayableForBasketWondersDecember31,2007Indicatesthepromptnessofpaymenttosuppliersbythefirm.IncomeStatement/BalanceSheetRatiosActivityRatios$1551$94=16.5(Assumeannualcreditpurchases=$1,551.)22ActivityRatiosPTinDaysDaysintheYearPayableTurnoverForBasketWondersDecember31,2007Averagenumberofdaysthatpayablesareoutstanding.IncomeStatement/BalanceSheetRatiosActivityRatios36516.5=22.1days23Activity

RatioComparisonsBW

Industry22.1 46.725.4 51.143.5 48.5Year200720062005PayableTurnoverinDaysBWhasimprovedthePTinDays.Isthisgood?24ActivityRatios(3)InventoryTurnoverCostofGoodsSoldInventoryForBasketWondersDecember31,2007Indicatestheeffectivenessoftheinventorymanagementpracticesofthefirm.IncomeStatement/BalanceSheetRatiosActivityRatios$1,599$696=2.3025Activity

RatioComparisonsBW

Industry2.30 3.452.44 3.762.64 3.69Year200720062005InventoryTurnoverRatioBWhasaverypoorinventoryturnoverratio.26ActivityRatios(4)TotalAssetTurnoverNetSalesTotalAssetsForBasketWondersDecember31,2007Indicatestheoveralleffectivenessofthefirminutilizingitsassetstogeneratesales.IncomeStatement/BalanceSheetRatiosActivityRatios$2,211$2,169=1.02275.ProfitabilityRatios(1)GrossProfitMarginGrossProfitNetSalesForBasketWondersDecember31,2007Indicatestheefficiencyofoperationsandfirmpricingpolicies.IncomeStatement/BalanceSheetRatiosProfitabilityRatios$612$2,211=.27728ProfitabilityRatios(2)NetProfitMarginNetProfitafterTaxesNetSalesForBasketWondersDecember31,2007Indicatesthefirm’sprofitabilityaftertakingaccountofallexpensesandincometaxes.IncomeStatement/BalanceSheetRatiosProfitabilityRatios$91$2,211=.04129ProfitabilityRatios(3)ReturnonInvestmentNetProfitafterTaxesTotalAssetsForBasketWondersDecember31,2007Indicatestheprofitabilityontheassetsofthefirm(afterallexpensesandtaxes).IncomeStatement/BalanceSheetRatiosProfitabilityRatios$91$2,160=.04230ProfitabilityRatios(4)ReturnonEquityNetProfitafterTaxesShareholders’EquityForBasketWondersDecember31,2007Indicatestheprofitabilitytotheshareholdersofthefirm(afterallexpensesandtaxes).IncomeStatement/BalanceSheetRatiosProfitabilityRatios$91$1,139=.0831ReturnonInvestmentandtheDuPontApproachROI2007

=.041x1.02=

.042

or4.2%ROIIndustry=.082x1.17=

.098

or9.8%ROI

=NetprofitmarginX

TotalassetturnoverEarningPower

=SalesprofitabilityX

Assetefficiency32ReturnonEquityand

theDuPontApproachROE2007=.041x1.02x1.90=

.080ROEIndustry=.082x1.17x1.88=.179ReturnOnEquity=NetprofitmarginX

TotalassetturnoverX

EquityMultiplierEquityMultiplier=TotalAssetsShareholders’Equity33SummaryoftheProfitabilityTrendAnalysesTheprofitabilityratiosforBWhaveALLbeenfallingsince2005.Eachhasbeenbelowtheindustryaveragesforthepastthreeyears.ThisindicatesthatCOGS

and

administrativecosts

maybothbetoohighandapotentialproblemforBW.Note,thisresultisconsistentwiththelowinterestcoverageratio.34SummaryofRatioAnalysesInventoriesaretoohigh.Maybepayingoffcreditors(accountspayable)toosoon.COGSmaybetoohigh.Selling,general,andadministrativecostsmaybetoohigh.35Ⅳ.Common-sizeAnalysisAnanalysisofpercentagefinancialstatementswhereallbalancesheetitemsaredividedbytotalassetsandallincomestatementitemsaredividedbynetsalesorrevenues.36Ⅴ.IndexAnalysesAnanalysisofpercentagefinancialstatementswhereallbalancesheetorincomestatementfiguresforabaseyearequal100.0(percent)andsubsequentfinancialstatementitemsareexpressedaspercentagesoftheirvaluesinthebaseyear.37Chapter8OverviewofWorkingCapitalManagement©PearsonEducationLimited2004FundamentalsofFinancialManagement,12/eCreatedby:GregoryA.Kuhlemeyer,Ph.D.CarrollCollege,Waukesha,WI38OverviewofWorkingCapitalManagementWorkingCapitalConceptsWorkingCapitalIssuesFinancingCurrentAssets:Short-TermandLong-TermMixCombiningLiabilityStructureandCurrentAssetDecisions39Ⅰ.WorkingCapitalConceptsNetWorkingCapitalCurrentAssets-CurrentLiabilities.GrossWorkingCapitalThefirm’sinvestmentincurrentassets.WorkingCapitalManagementTheadministrationofthefirm’scurrentassetsandthefinancingneededtosupportcurrentassets.40SignificanceofWorkingCapitalManagementInatypicalmanufacturingfirm,currentassetsexceedone-halfoftotalassets.ExcessivelevelscanresultinasubstandardReturnonInvestment(ROI).Currentliabilitiesaretheprincipalsourceofexternalfinancingforsmallfirms.Requirescontinuous,day-to-daymanagerialsupervision.WCMaffectsthecompany’srisk,return,andshareprice.41Ⅱ.WorkingCapitalIssuesAssumptions50,000maximumunitsofproductionContinuousproductionThreedifferentpoliciesforcurrentassetlevelsarepossibleOptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB42ⅰ.ImpactonLiquidityLiquidityAnalysisPolicy

LiquidityA HighB AverageC LowGreatercurrentassetlevelsgeneratemoreliquidity;allotherfactorsheldconstant.OptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB43ⅱ.Impacton

ExpectedProfitabilityReturnonInvestment=NetProfitTotalAssetsLetCurrentAssets=(Cash+Rec.+Inv.)ReturnonInvestment=NetProfitCurrent+FixedAssetsOptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB44ⅲ.Impacton

ExpectedProfitabilityProfitabilityAnalysisPolicy

ProfitabilityA LowB AverageC HighAscurrentassetlevelsdecline,totalassetswilldeclineandtheROIwillrise.OptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB45ⅳ.ImpactonRiskDecreasingcashreducesthefirm’sabilitytomeetitsfinancialobligations.Morerisk!Strictercreditpoliciesreducereceivablesandpossiblylosesalesandcustomers.Morerisk!Lowerinventorylevelsincreasestockoutsandlostsales.Morerisk!OptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB46ImpactonRiskRiskAnalysisPolicy

RiskA LowB AverageC HighRiskincreasesasthelevelofcurrentassetsarereduced.OptimalAmount(Level)ofCurrentAssets025,00050,000OUTPUT(units)ASSETLEVEL($)CurrentAssetsPolicyCPolicyAPolicyB47SummaryoftheOptimalAmountofCurrentAssetsSUMMARYOFOPTIMALCURRENTASSETANALYSISPolicy

Liquidity

Profitability

Risk

A High Low LowB Average Average AverageC Low High High1.Profitabilityvariesinverselywithliquidity.2.Profitabilitymovestogetherwithrisk. (riskandreturngohandinhand!)48Ⅲ.ClassificationsofWorkingCapitalTimePermanentTemporaryComponentsCash,marketablesecurities,receivables,andinventory49ⅰ.PermanentWorkingCapitalTheamountofcurrentassetsrequiredtomeetafirm’slong-termminimumneeds.PermanentcurrentassetsTIMEDOLLARAMOUNT50ⅱ.TemporaryWorkingCapitalTheamountofcurrentassetsthatvarieswithseasonalrequirements.PermanentcurrentassetsTIMEDOLLARAMOUNTTemporarycurrentassets51Ⅳ.FinancingCurrentAssets:Short-TermandLong-TermMixSpontaneousFinancing:Tradecredit,andotherpayablesandaccruals,thatarisespontaneouslyinthefirm’sday-to-dayoperations.Basedonpoliciesregardingpaymentforpurchases,labor,taxes,andotherexpenses.Weareconcernedwithmanagingnon-spontaneousfinancingofassets.52ⅰ.Hedging(orMaturityMatching)ApproachAmethodoffinancingwhereeachassetwouldbeoffsetwithafinancinginstrumentofthesameapproximatematurity.TIMEDOLLARAMOUNTLong-termfinancingFixedassetsCurrentassets*Short-termfinancing**53Hedging(orMaturityMatching)Approach*Lessamountfinancedspontaneouslybypayablesandaccruals.**

Inadditiontospontaneousfinancing(payablesandaccruals).TIMEDOLLARAMOUNTLong-termfinancingFixedassetsCurrentassets*Short-termfinancing**54FinancingNeedsand

theHedgingApproachFixedassetsandthenon-seasonalportionofcurrentassetsarefinancedwithlong-termdebtandequity(long-termprofitabilityofassetstocoverthelong-termfinancingcostsofthefirm).Seasonalneedsarefinancedwithshort-termloans(undernormaloperationssufficientcashflowisexpectedtocovertheshort-termfinancingcost).55Self-LiquidatingNature ofShort-TermLoansSeasonalordersrequirethepurchaseofinventorybeyondcurrentlevels.Increasedinventoryisusedtomeettheincreaseddemandforthefinalproduct.Salesbecomereceivables.Receivablesarecollectedandbecomecash.Theresultingcashfundscanbeusedtopayofftheseasonalshort-termloanandcoverassociatedlong-termfinancingcosts.56ⅱ.Risksvs.CostsTrade-Off(ConservativeApproach)Long-TermFinancingBenefitsLessworryinrefinancingshort-termobligationsLessuncertaintyregardingfutureinterestcostsLong-TermFinancingRisksBorrowingmore

thanwhatisnecessaryBorrowingatahigheroverallcost(usually)ResultManageracceptslessexpectedprofitsinexchangefortakinglessrisk.57Risksvs.CostsTrade-Off(ConservativeApproach)Firmcanreducerisksassociatedwithshort-termborrowingbyusingalargerproportionoflong-termfinancing.TIMEDOLLARAMOUNTLong-termfinancingFixedassetsCurrentassetsShort-termfinancing58ⅲ.ComparisonwithanAggressiveApproachShort-TermFinancingBenefitsFinancinglong-termneedswithalowerinterestcostthanshort-termdebtBorrowingonlywhatisnecessaryShort-TermFinancingRisksRefinancingshort-termobligationsinthefutureUncertainfutureinterestcostsResultManageracceptsgreaterexpectedprofitsinexchangefortakinggreaterrisk.59Firmincreasesrisksassociatedwithshort-termborrowingbyusingalargerproportionofshort-termfinancing.TIMEDOLLARAMOUNTLong-termfinancingFixedassetsCurrentassetsShort-termfinancingRisksvs.CostsTrade-Off(AggressiveApproach)60SummaryofShort-vs.Long-TermFinancingFinancingMaturityAssetMaturitySHORT-TERMLONG-TERMLowRisk-ProfitabilityModerateRisk-ProfitabilityModerateRisk-ProfitabilityHighRisk-ProfitabilitySHORT-TERM(Temporary)LONG-TERM(Permanent)61Ⅴ.CombiningLiabilityStructureandCurrentAssetDecisionsThelevelofcurrentassetsandthemethodoffinancingthoseassetsareinterdependent.Aconservativepolicyof“high”levelsofcurrentassetsallowsamoreaggressivemethodoffinancingcurrentassets.Aconservativemethodoffinancing (all-equity)allowsanaggressivepolicyof“low”levelsofcurrentassets.62Chapter9CashandMarketableSecuritiesManagement©PearsonEducationLimited2004FundamentalsofFinancialManagement,12/eCreatedby:GregoryA.Kuhlemeyer,Ph.D.CarrollCollege,Waukesha,WI63CashandMarketableSecuritiesManagementMotivesforHoldingCashSpeedingUpCashReceiptsS-l-o-w-i-n-gD-o-w-nCashPayoutsElectronicCommerceOutsourcingCashBalancestoMaintainInvestmentinMarketableSecurities64Ⅰ.MotivesforHoldingCashTransactionsMotive

--tomeetpaymentsarisingintheordinarycourseofbusinessSpeculativeMotive

--totakeadvantageoftemporaryopportunitiesPrecautionaryMotive

--tomaintainacushionorbuffertomeetunexpectedcashneeds65CashManagementSystemCollectionsDisbursementsMarketablesecuritiesinvestmentControlthroughinformationreporting=FundsFlow=InformationFlow66Ⅱ.SpeedingUpCashReceiptsExpeditepreparingandmailingtheinvoiceAcceleratethemailingofpaymentsfromcustomersReducethetimeduringwhichpaymentsreceivedbythefirmremainuncollectedⅰ.Collections67EarlierBillingAcceleratepreparationandmailingofinvoicescomputerizedbillinginvoicesincludedwithshipmentinvoicesarefaxedadvancepaymentrequestspreauthorizeddebits68PreauthorizedPaymentsPreauthorizeddebitThetransferoffundsfromapayor’sbankaccountonaspecifieddatetothepayee’sbankaccount;thetransferisinitiatedbythepayeewiththepayor’sadvanceauthorization.69ⅱ.LockboxSystemsTraditionalLockboxApostofficeboxmaintainedbyafirm’sbankthatisusedasareceivingpointforcustomerremittances.ElectronicLockboxAcollectionserviceprovidedbyafirm’sbankthatreceiveselectronicpaymentsandaccompanyingremittancedataandcommunicatesthisinformationtothecompanyinaspecifiedformat.70LockboxProcess*Customersareinstructedtomailtheirremittancestothelockboxlocation.Bankpicksupremittancesseveraltimesdailyfromthelockbox.Bankdepositsremittancesinthecustomersaccountandprovidesadepositslipwithalistofpayments.Companyreceivesthelistandanyadditionalmaileditems.*Basedonthetraditionallockboxsystem71LockboxSystemDisadvantageCostofcreatingandmaintainingalockboxsystem.Generally,notadvantageousforsmallremittances.AdvantageReceiveremittancessoonerwhichreducesprocessingfloat.72ⅲ.ConcentrationBankingCompensatingBalanceDemanddepositsmaintainedbyafirmtocompensateabankforservicesprovided,creditlines,orloans.CashConcentrationThemovementofcashfromlockboxorfieldbanksintothefirm’scentralcashpoolresidinginaconcentrationbank.73ConcentrationBankingImprovescontroloverinflowsandoutflowsofcorporatecash.Reducesidlecashbalancestoaminimum.Allowsformoreeffectiveinvestmentsbypoolingexcesscashbalances.Movingcashbalancestoacentrallocation:74Ⅲ.S-l-o-w-i-n-gD-o-w-nCashPayouts

“PlayingtheFloat”ControlofDisbursementsPayablethroughDraft(PTD)PayrollandDividendDisbursementsZeroBalanceAccount(ZBA)RemoteandControlledDisbursing75ⅰ.“PlayingtheFloat”NetFloat

--Thedollardifferencebetweenthebalanceshowninafirm’s(orindividual’s)checkbookbalanceandthebalanceonthebank’sbooks.76ControlofDisbursementsFirmsshouldbeableto:1.shiftfundsquicklytobanksfromwhichdisbursementsaremade.2.generatedailydetailedinformationonbalances,receipts,anddisbursements.77Solution:Centralizepayablesintoasingle(smallernumberof)account(s).Thisprovidesbettercontrolofthedisbursementprocess.78RemoteandControlledDisbursingRemoteDisbursement

--Asysteminwhichthefirmdirectscheckstobedrawnonabankthatisgeographicallyremotefromitscustomersoastomaximizecheck-clearingtime.Thismaximizesdisbursementfloat.

79RemoteandControlledDisbursingControlledDisbursement

--Asysteminwhichthefirmdirectscheckstobedrawnonabank(orbranchbank)thatisabletogiveearlyormid-morningnotificationofthetotaldollaramountofchecksthatwillbepresentedagainstitsaccountthatday.80Ⅳ.ElectronicCommerceElectronicCommerce

--Theexchangeofbusinessinformationinanelectronic(non-paper)format,includingovertheInternet.81Ⅴ.OutsourcingImprovingcompanyfocusReducingandcontrollingoperatingcostsFreeingresourcesforotherpurposes

*TheOutsourcingInstitute,2002Outsourcing--Subcontractingacertainbusinessoperationtoanoutsidefirm,insteadofdoingit“in-house.”Whymightafirmoutsource?*82Ⅵ.CashBalancestoMaintainTheoptimallevelofcashshouldbethelargerof:(1) thetransactionbalancesrequiredwhencashmanagementisefficient.(2) thecompensatingbalancerequirementsofcommercialbanks.83Ⅶ.InvestmentinMarketableSecuritiesMarketableSecuritiesareshownonthebalancesheetas:1. Cashequivalentsifmaturitiesarelessthanthree(3)monthsatthetimeofacquisition.2. Short-terminvestmentsifremainingmaturitiesarelessthanone(1)year.84TheMarketableSecuritiesPortfolioReadyCashSegment(R$)Optimalbalanceofmarketablesecuritiesheldtotakecareofprobabledeficienciesinthefirm’scashaccount.R$F$C$85ControllableCashSegment(C$)Marketablesecuritiesheldformeetingcontrollable(knowable)outflows,suchastaxesanddividends.TheMarketableSecuritiesPortfolioR$F$C$86FreeCashSegment(F$)“Free”marketablesecurities(thatis,availableforasyetunassignedpurposes).TheMarketableSecuritiesPortfolioR$F$C$87VariablesinMarketableSecuritiesSelectionMarketability(orLiquidity)Theabilitytosellasignificantvolumeofsecuritiesinashortperiodoftimeinthesecondarymarketwithoutsignificantpriceconcession.SafetyReferstothelikelihoodofgettingbackthesamenumberofdollarsyouoriginallyinvested(principal).88VariablesinMarketableSecuritiesSelectionMaturityReferstotheremaininglifeofthesecurity.InterestRate(orYield)RiskThevariabilityinthemarketpriceofasecuritycausedbychangesininterestrates.89SelectingSecuritiesforthePortfolioSegmentsReadyCashSegment(R$)Safetyandabilitytoconverttocashismostimportant.SelectU.S.Treasuries

forthissegment.R$F$C$90ControllableCashSegment(C$)Marketabilitylessimportant.Possiblymatchtimeneeds.MayselectCDs,repos,

BAs,

eurosforthissegment.R$F$C$SelectingSecuritiesforthePortfolioSegments91FreeCashSegment(F$)Basechoiceonyieldsubjecttorisk-returntrade-offs.Anymoneymarketinstrumentmaybeselectedforthissegment.R$F$C$SelectingSecuritiesforthePortfolioSegments92Chapter10AccountsReceivableandInventoryManagement©PearsonEducationLimited2004FundamentalsofFinancialManagement,12/eCreatedby:GregoryA.Kuhlemeyer,Ph.D.CarrollCollege,Waukesha,WI93AccountsReceivableandInventoryManagementCreditandCollectionPoliciesAnalyzingtheCreditApplicantInventoryManagementandControl94Ⅰ.CreditandCollectionPoliciesoftheFirm(1)AverageCollectionPeriod(2)Bad-debtLossesQualityofTradeAccountLengthofCreditPeriodPossibleCashDiscountFirmCollectionProgram95ⅰ.CreditStandardsThefinancialmanagershouldcontinuallylowerthefirm’screditstandardsaslongasprofitabilityfromthechangeexceedstheextracostsgeneratedbytheadditionalreceivables.CreditStandards

--Theminimumqualityofcreditworthinessofacreditapplicantthatisacceptabletothefirm.Whylowerthefirm’screditstandards?96CreditStandardsAlargercreditdepartmentAdditionalclericalworkServicingadditionalaccountsBad-