Chapter_31Cash Management(公司金融,英文版).pptVIP

Slides by Matthew Will Topics Covered Cash Collection and Disbursement Systems Managing Float How Much Cash Should the Firm Hold? Investing Idle Cash Money Market Investments Floating Rate Preferred Stock Float Time exists between the moment a check is written and the moment the funds are deposited in the recipient’s account. This time spread is called Float. Payment Float - Checks written by a company that have not yet cleared. Availability Float - Checks already deposited that have not yet cleared. Float Payment Float illustration - The company issues a $200,000 check that has not yet cleared. Float Availability Float illustration - The company deposits a $100,000 check that has not yet cleared. Float Net Float illustration Net float = payment float - availability float Managing Float Payers attempt to create delays in the check clearing process. Recipients attempt to remove delays in the check clearing process. Sources of delay Time it takes to mail check Time for recipient to process check Time for bank to clear check Managing Float Managing Float Concentration Banking - system whereby customers make payments to a regional collection center which transfers the funds to a principal bank. Lock-Box System - System whereby customers send payments to a post office box and a local bank collects and processes checks. Zero-Balance Accounts - Regional bank accounts to which just enough funds are transferred daily to pay each day’s bills. Money Markets Money Market - market for short term financial assets. commercial paper certificates of deposit repurchase agreements Inventories Cash Balances Economic Order Quantity - Order size that minimizes total inventory costs. Inventories Cash Balances Determination of optimal order size Inventories Cash Balances The optimal amount of short term securities sold to raise cash will be higher when annual cash outflows are higher and when the cost per sale of securities is higher. Conversely, the initial cash balance falls when