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rica
nerie
earl
rowela
neldie
P1,216,666
1,013,889
Inventories
250,000
Accounts receivable
300,000
Accounts payable
Inventory Conversion Period =
150,000
Inventory
___________________
P250,000
___________________
90 days
P1,013,889/365days
Receivables
_______________
Sales/day
=
P300,000
_______________
P1,216,666/365
Payables Deferral Period =
Payables
_______________
Cost of goods sold/day
=
P150,000
________________
P1,013,889/365
= 54 days
= 90 days
Average
Conversion
Period
90 days
Payables
Collection
Period
90 days
Deferral
CCC
Period
54 days
= 126 days
Aggressive Approach
- a policy that use short-term financing to finance permanent
assets.
- really quite risky.
Conservative Approach
- a policy indicating that long-term capital is used to finance all the
permanent assets & also to meet some of the seasonal needs.
- a very safe, conservative financing policy.
CASH BUDGET
- An estimation of the cash inflows & outflows for a
business or individual for a specific period of time.
- This budget is used to ascertain whether
company operations and other activities will provide
a sufficient amount of cash to meet projected cash
requirements.
Cash Management
Inventory Management
Accounts Receivable Management
Accounts Payable Management
CASH MANAGEMENT
Is an important part of any business efforts to thrive financially.
Cash is needed for performing all the activities of a firm.
cash as reported on balance sheets, generally includes short-term
securities, which are also called cash equivalents.
Ready cash
Near cash
MARKETABLE SECURITIES
represent highly liquid investments that are considered to
be current assets and, therefore, are included in the
working capital calculations.
Short-term, interest-earning, money market instruments
used by the firm to obtain a return on temporarily idle
fund.
Four factors that influence the choice of marketable
securities: risks, maturity, yield, and liquidity.
Examples are banker's acceptance, Treasury bills (T-bills),
commercial papers, certificates of deposit (CDs) and other
instruments.
DEMAND DEPOSITS
an account with a bank or other financial institution that
allows the depositor to withdraw his or her funds from
the account without warning or with less than seven
days' notice.
Techniques to optimize demand deposit
holdings:
Hold marketable securities rather than
demand deposits.
Forecast payments and receipts better.