ch17financingcurrentassets(财务管理,英文版).pptVIP

CHAPTER 17Financing Current Assets Working capital financing policies A/P (trade credit) Commercial paper S-T bank loans Working Capital Financing Policies Moderate: Match the maturity of the assets with the maturity of the financing. Aggressive: Use short-term financing to finance permanent assets. Conservative: Use permanent capital for permanent assets and temporary assets. Moderate Financing Policy Conservative Financing Policy What is short-term credit, and what are the major sources? S-T credit: Any debt scheduled for repayment within one year. Major sources: Accounts payable (trade credit) Bank loans Commercial paper Accruals Is S-T credit riskier than L-T? To company, yes. Required repayment always looms. May have trouble rolling over loans. Advantages of short-term credit: Low cost--visualize yield curve. Can get funds relatively quickly. Can repay without penalty. Is there a cost to accruals? Do firms have much control over amount of accruals? Accruals are free in that no explicit interest is charged. Firms have little control over the level of accruals. Levels are influenced more by industry custom, economic factors, and tax laws. What is trade credit? Trade credit is credit furnished by a firm’s suppliers. Trade credit is often the largest source of short-term credit, especially for small firms. Spontaneous, easy to get, but cost can be high. BB buys $3,030,303 gross, or $3,000,000 net, on terms of 1/10, net 30, and pays on Day 40. How much free and costly trade credit, and what’s the cost of costly trade credit? Net daily purchases = $3,000,000/360 = $8,333. Gross/Net Breakdown Company buys goods worth $3,000,000. That’s the cash price. They must pay $30,303 more if they don’t take discounts. Think of the extra $30,303 as a financing cost similar to the interest on a loan. Want to compare that cost with the cost of a bank loan. Nominal Cost of Costly Trade Credit Nominal Cost Formula, 1/10, net 40