After studying this chapter you will be able to understand: Define liquid assets, distinguish between liquidity management and treasury management, identify the motives for holding liquid assets, prepare a cash budget, apply cash management models,.and other contents. | Chapter 23 Management of Short-Term Assets: Liquid Assets and Accounts Receivable 2 2 2 2 2 3 3 3 3 3 Learning Objectives Define liquid assets. Distinguish between liquidity management and treasury management. Identify the motives for holding liquid assets. Prepare a cash budget. Apply cash management models. 2 2 2 2 2 3 3 3 3 3 Learning Objectives (cont.) Identify avenues for short-term investment by companies. Understand the application of portfolio theory to investment in short-term securities. Define accounts receivable and distinguish between trade credit and consumer credit. Identify the benefits and costs of holding accounts receivable. 3 3 3 3 Learning Objectives (cont.) Identify the four elements of credit policy. Understand the factors in implementing a collection policy. Apply the net present value method to evaluate alternative credit and collection policies. Understand the ways in which accounts receivable may be employed as a means of financing. Apply financial . | Chapter 23 Management of Short-Term Assets: Liquid Assets and Accounts Receivable 2 2 2 2 2 3 3 3 3 3 Learning Objectives Define liquid assets. Distinguish between liquidity management and treasury management. Identify the motives for holding liquid assets. Prepare a cash budget. Apply cash management models. 2 2 2 2 2 3 3 3 3 3 Learning Objectives (cont.) Identify avenues for short-term investment by companies. Understand the application of portfolio theory to investment in short-term securities. Define accounts receivable and distinguish between trade credit and consumer credit. Identify the benefits and costs of holding accounts receivable. 3 3 3 3 Learning Objectives (cont.) Identify the four elements of credit policy. Understand the factors in implementing a collection policy. Apply the net present value method to evaluate alternative credit and collection policies. Understand the ways in which accounts receivable may be employed as a means of financing. Apply financial statement analysis to short-term asset management. 2 2 2 2 2 Introduction Liquidity is essential in order to ensure that creditors are paid on time. This ensures the business can continue to operate — solvency. However, liquidity is costly and there is a trade off between costs and benefits, along with an optimal level of liquidity. Many companies sell on credit, leading to accounts receivable — need to manage accounts receivable efficiently to maximise company value. 4 4 4 4 4 4 22 22 22 22 Overview of Liquidity Management Liquid assets Cash and assets that are readily convertible into cash, such as bills of exchange and treasury notes. Liquidity management Decisions on the composition and level of a company’s liquid assets. Treasury management Conducted by a group or department under the control of the company treasurer, to manage the company’s liquidity, and to oversee its exposure to various kinds of financial risk. 4 4 4 4 4 4 22 22 22 22 Centralisation of Liquidity Management .
