Bài giảng Management theory and practice Financial: Chương 17 với các nội dung chính Cash conversion cycle; Alternative net operating working capital policies; Cash budget; Short-term financing policies. Cùng tìm hiểu và tham khảo nội dung thông tin tài liệu. | Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-3 Corporate Valuation and Working Capital Management Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-4 Topics in Chapter Cash conversion cycle Alternative net operating working capital policies Cash budget Short-term financing policies Trade credit Bank loans and their costs 4 1 Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-5 Basic Definitions (Gross) working capital: total current assets used in operations Net working capital: current assets - current liabilities. Net operating working capital (NOWC): Operating CA – Operating CL = (cash + inventories + accounts receivable) – (accruals + accounts payable) 5 2 Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-6 Cash Conversion Cycle The cash conversion cycle focuses on the time between payments made for materials and labor and payments received from sales: Cash Conversion = Cycle Inventory Conversion + Period . | Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-3 Corporate Valuation and Working Capital Management Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-4 Topics in Chapter Cash conversion cycle Alternative net operating working capital policies Cash budget Short-term financing policies Trade credit Bank loans and their costs 4 1 Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-5 Basic Definitions (Gross) working capital: total current assets used in operations Net working capital: current assets - current liabilities. Net operating working capital (NOWC): Operating CA – Operating CL = (cash + inventories + accounts receivable) – (accruals + accounts payable) 5 2 Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-6 Cash Conversion Cycle The cash conversion cycle focuses on the time between payments made for materials and labor and payments received from sales: Cash Conversion = Cycle Inventory Conversion + Period Receivables Collection - Period Payables Deferral Period Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-7 Cash Conversion Cycle Cash Conversion Cycle CCC = inventory period (73) + receivables period (24) – accounts payable period (30) = 67 days = Where sales = $10m, inv = $2m, cost of goods sold = $8m, A/R = A/P = $657,534 Net delay = cash inflow delay – payment delay = (73 + 24) – 30 = 67 days Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-8 Payables COGS/365 Inventory sales/365 Receivables sales/365 + - Shortening Cash Conversion Cycle CCC can be improved: By processing and selling goods quickly (ICP↓) By speeding up collections (DSO↓) By slowing down payments (PDP↑) Without increasing costs or depressing sales, firms should make their CCC as little as possible Copyright © 2011 by Nelson Education Ltd. All rights reserved. 17-9 Benefits from shortening CCC ∆NOWC = -$268,493 (improvement) Copyright © 2011 by Nelson Education Ltd. All rights reserved. .
