Current Asset Management参考.ppt

Current Asset Management 7 Chapter Outline What is current asset management Cash management and its importance Management of marketable securities Accounts receivable and inventory management Inventory management and policy decisions required Liquidity vis-à-vis returns What is Current Asset Management? Current asset management is essentially an extension of working capital management It is concerned with the current assets of a firm (cash, A/R, marketable securities, and inventory) A financial manager needs to remember that the less liquid an asset is, the higher the required return Cash Management Financial managers actively attempt to keep cash (non-earning asset) to a minimum It is critical to have sufficient cash to assuage emergencies Steps to improve overall profitability of a firm: Minimize cash balances Have accurate knowledge of when cash moves in and out of the firm Cash Management Use cash budgets Speed up collections Extend disbursements Maintain optimum level of cash Invest excess cash Reasons for Holding Cash Balances Transactions balances Payments towards planned expenses Compensative balances for banks Compensate a bank for services provided rather than paying directly for them Precautionary needs Emergency purposes Optimum Level of Cash How much to keep in cash? transaction needs? cash flows predictable? borrowing arrangements? interest rates? Keep safety level in cash, invest excess Low-risk, liquid investments Savings accounts Money market funds Term deposits Treasury bills US $ deposits Earn small return on excess funds Collection and Disbursements The financial manager attempts to get maximum use of minimum balances by speeding inflows and slowing outflows. Playing the float: Using the difference in the cash balances shown on the bank’s records and those shown on the firm’s records. Expanded Cash Flow Cycle Cash Flow Cycle Cash flow relies on: Payment pattern of customers Speed at which suppliers and creditors process checks Efficienc