This chapter introduces the basic elements of short-term financial decisions. First, we discuss the short-term operating activities of the firm. We then identify some alternative short-term financial policies. Finally, we outline the basic elements in a short-term fi nancial plan and describe short-term financing instruments. | Chapter Outline Chapter 18 Short-Term Finance and Planning Chapter Organization Tracing Cash and Net Working Capital The Operating Cycle and the Cash Cycle Some Aspects of Short-Term Financial Policy The Cash Budget A Short-Term Financial Plan Short-Term Borrowing Summary and Conclusions CLICK MOUSE OR HIT SPACEBAR TO ADVANCE copyright © 2002 McGraw-Hill Ryerson, Ltd. Cash Flow Time Line (Figure ) Managers Who Deal with Short-Term Financial Problems (Table ) Duties related to short-term Title of manager financial management Assets/liabilities influenced Cash manager Collection, concentration, disbursement; Cash, marketable short-term investments; short-term borrowing; securities, short-term loans banking relations Credit manager Monitoring and control of accounts Accounts receivable receivable; credit policy decisions Marketing manager Credit policy decisions Accounts receivable Purchasing manager Decisions on purchases, suppliers; may Inventory, accounts payable negotiate payment terms Production manager Setting of production schedules and Inventory, accounts payable materials requirements Payables manager Decisions on payment policies and on Accounts payable whether to take discounts Controller Accounting information on cash flows; Accounts receivable, reconciliation of accounts payable; application accounts payable of payments to accounts receivable Source: Ned C. Hill and William L. Sartoris, Short-Term Financial Management, 2nd ed. (New York: Macmillan, 1992), p. 15. Survey: The Importance of Short-Term Finance and Planning Long-term investment decisions (capital budgeting) and long-term financing decisions are characterized by the facts that they (a) generally involve large amounts of money, and (b) are relatively infrequent occurrences. Decisions that come under the heading “short-term finance” are equally important, because, while typical decisions often don’t involve as much money, . | Chapter Outline Chapter 18 Short-Term Finance and Planning Chapter Organization Tracing Cash and Net Working Capital The Operating Cycle and the Cash Cycle Some Aspects of Short-Term Financial Policy The Cash Budget A Short-Term Financial Plan Short-Term Borrowing Summary and Conclusions CLICK MOUSE OR HIT SPACEBAR TO ADVANCE copyright © 2002 McGraw-Hill Ryerson, Ltd. Cash Flow Time Line (Figure ) Managers Who Deal with Short-Term Financial Problems (Table ) Duties related to short-term Title of manager financial management Assets/liabilities influenced Cash manager Collection, concentration, disbursement; Cash, marketable short-term investments; short-term borrowing; securities, short-term loans banking relations Credit manager Monitoring and control of accounts Accounts receivable receivable; credit policy decisions Marketing manager Credit policy decisions Accounts receivable Purchasing manager Decisions on purchases, .
