yyy2
Terms
undefined, object
copy deck
- yield curve
- base cost for long-term capital positive slope
- working capital management
- management of short-term assets and liabilities
- net working capital
- current assets-current liabilities
- WC Old Paradigm
- WC is good cost of maintain inventorys - excess inventory adds value to customers AR - lowest price
- WC New Paradigm
- Wc is bad b/c of poor planning and use of funds cost of maintaining inventory - reduce inventory by changing processes and working with suppliers AR - timeliness of delivery is most important than cost
- the cost of holding current assets
- carrying costs shortage costs
- carrying costs
- easy to measure as cost increases we increase the level of assets includes: capital costs, warehouses, insurance, bad credit
- shortage costs
- tough to measure as cost decreases we increase the level of assets includes: stock out (out of inventory) sales (tight credit limit)
- flexible policy
- high levels of inventory and AR costs are high but generate a greater future cash flow
- restrictive policy
- low levels of inventory and AR
- the hedged approach
- reflects seasonal variation and permanent current assets CAPITAL
- the cash conversion cycle
- the number of days from the time you pay your suppliers until you collect from customers CCC = DSI + DSO - DPO want a low or negative CCC
- ways to improve CCC
- 1) collect from customers faster (prepay) 2) increase inventory turnover 3) lengthen payables period
- the operating cycle
- the time a company purchases raw materials and provides labor for production to the time it collects payments for its final product Operating Cycle = DSI + DSO
- traditional views
- invest if ROI > COC
- Capital Budgeting and Stock Prices
- when a company announces capital investment plans it increases the stock prices
- good investments
- Microsoft/Windows, Boeing/777, Alaskan Pipeline, Disney/Lion King
- bas investments
- GM/ Co. Infrastructure, IBM/ R&D, smokless cigarettes, EuroDisney, Motorola