Working Capital and the Financing Decision C H A P T E R S I X

Save this PDF as:
 WORD  PNG  TXT  JPG

Size: px
Start display at page:

Download "Working Capital and the Financing Decision C H A P T E R S I X"

Transcription

1 Working Capital and the Financing Decision C H A P T E R S I X Limited 2000

2 Figure 6-1a The nature of asset growth A. Stage I: Limited or no Growth PPT 6-1 Dollars Temporary current assets Capital assets Time period Limited 2000

3 Figure 6-1b The nature of asset growth B. Stage II: Growth Dollars Temporary current assets PPT 6-1 Permanent current assets Capital assets Time period Limited 2000

4 Figure 6-1b The nature of asset growth B. Stage II: Growth Dollars Temporary current assets PPT 6-1 Permanent current assets Capital assets Time period Limited 2000

5 Figure 6-2a Sales and earnings for, PPT $ thousands rd 90 3rd 91 3rd 92 Sources: Symbol: MHR 3rd 93 3rd 94 3rd 95 Quarterly sales 3rd 96 3rd 97 3rd 98 Limited 2000

6 Figure 6-2b Sales and earnings for, PPT $ thousands rd 90 3rd 91 3rd 92 3rd 93 3rd 94 3rd 95 3rd 96 3rd 97 3rd Sources: Symbol: MHR Quarterly earnings Limited 2000

7 Figure 6-3a Sales and earnings for Hudson s Bay Co. and Sears Canada PPT $ millions Sales Sources: Symbol: HBC Symbol: SCC Hudson's Bay Sears Limited 2000

8 Figure 6-3b Sales and earnings for Hudson s Bay Co. and Sears Canada PPT $ thousands Earnings Sources: Symbol: HBC Symbol: SCC Hudson's Bay Sears Limited 2000

9 Expanded cash flow cycle PPT 6-3 Customers Inventory Finished Goods Goods in in process Raw Raw materials Materials and and service Suppliers: accts. accts. payable Labor: wages payable Other: expenses Sales Sales Geographical area area Product or or division Customer type type Cash Accounts receivable days days days days days days days days Marketable securities Interest and dividends Government taxes taxes Federal income taxes taxes Provincial taxes taxes Other Other taxes taxes -term lenders Chartered banks banks Non-bank lenders Foreign banks banks and and lenders Limited 2000

10 Table 6-1 Yawakuzi sales forecast (in units) PPT 6-4 1st Quarter 2nd Quarter 3rd Quarter Quarter October. 300 January.. 0 April.1,000 July. 2,000 November..150 February. 0 May..2,000 August.1,000 December March June..2,000 September..500 Total sales of 9,600 units at $3,000 each = $28,800,000 in sales. Limited 2000

11 Table 6-2 Yawakuzi s production schedule and inventory PPT 6-5 Inventory Production (at cost of Beginning (level Ending $2,000 inventory + production) Sales = inventory per unit) October ,300 $2,600,000 November 1, ,950 3,900,000 December 1, ,700 5,400,000 January 2, ,500 7,000,000 February 3, ,300 8,600,000 March 4, ,500 9,000,000 April 4, ,000 4,300 8,600,000 May 4, ,000 3,100 6,200,000 June 3, ,000 1,900 3,800,000 July 1, , ,400,000 August , ,000,000 September ,600,000 Limited 2000

12 Table 6-3a Sales forecast, cash receipts and payments, and cash budget PPT 6-6 Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Sales Forecast ($ millions) Sales (units) ,000 2,000 2,000 2,000 1, Sales $0.9 $0.45 $0.15 $1.8 $3.0 $6.0 $6.0 $6.0 $3.0 $1.5 (unit price, $3,000) 50% cash.45 $.225 $.075 $0.9 $1.5 $3.0 $3.0 $3.0 $1.5 $.75 50% cash from prior month s sales.75* Total cash receipts $ $0.300 $0.075 $0.9 $2.4 $4.5 $6.0 $6.0 $4.5 $2.25 *Assumes September sales of $1.5 million. Cash Receipts Schedule ($ millions) Limited 2000

13 Table 6-3b Sales forecast, cash receipts and payments, and cash budget Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Cash Payments Schedule ($ millions) PPT 6-6 Constant production of 800 units/month (cost $2,000 per unit) $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 $1.6 Overhead Dividends & interest 1.0 Taxes Total cash payments $2.3 $2.0 $2.0 $2.3 $2.0 $2.0 $2.3 $2.0 $2.0 $2.3 $3.0 $2.0 Cash Budget ($ millions; required minimum balance is $0.25 million) Cash flow $(1.1) $(1.325) $(1.7) $(2.225) $(2.0) $(1.1) $.1 $2.5 $4.0 $3.7 $1.5 $.25 Beginning cash Cumulative cash balance $(.85)$(1.075) $(1.45) $(1.975) $(1.75) $(.85) $.35 $2.75 $4.25 $3.95 $2.6 $2.85 Monthly loan or (repayment) (0.1) (2.5) (4.0) (2.85) Cumulative loan Ending cash balance Assumes cash balance of $.25 million at the beginning of October and that this is the desired minimum cash balance. Limited 2000

14 Table 6-4 Total current assets, first year ($ millions) PPT 6-7 Accounts Total Current Cash Receivable Inventory Assets October $0.25 $0.450 $2.6 $3.30 November December January February March April May June July August September Limited 2000

15 End of First Year Second Year PPT 6-8 Table 6-5a Cash budget and assets for second year with no growth in sales ($ millions) Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Cash flow $0.25 $(1.1) $(1.325) $(1.7) $(2.225 $(2.0) $(1.1) $0.1 $2.5 $4.0 $3.7 $1.5 $0.25 Beginning cash Cumulative (1.275) (1.975) (1.75) (0.85) cash balance Monthly loan or (repayment) (0.1) (2.5) (4.0) (0.25) Cumulative loan Ending cash balance $2.85 $1.75 $0.425 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $3.70 $5.2 $5.45 Limited 2000

16 End of First Year Second Year Sept Oct Nov Dec Jan Feb Mar Apr May June July Aug Sept Total Current Assets PPT 6-8 Table 6-5b Cash budget and assets for second year with no growth in sales ($ millions) Ending cash balance $2.85 $1.75 $0.425 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $0.25 $3.70 $5.2 $5.45 Accounts receivable Inventory Total current assets $5.2 $4.8 $4.55 $5.725 $7.25 $8.85 $10.15 $10.35 $9.45$7.05 $8.1 $7.7 $7.80 Limited 2000

17 Figure 6-6 The nature of asset growth (Yawakuzi) 11 $ millions PPT Accounts receivable Total current assets Inventory Cash Inventory O N D J F M A M J J A S O N D J F M A M J J A S Cash Accounts receivable Inventory Limited 2000

18 Figure 6-7 Matching long-term and short-term needs Dollars Temporary current assets PPT term financing Permanent current assets Long-term financing Capital assets (debt & equity) Time period Limited 2000

19 Figure 6-8 Using long-term financing for part of short-term needs PPT 6-11 Dollars Temporary current assets -term financing Permanent current assets Long-term financing (debt & equity) Capital assets Time period Limited 2000

20 Figure 6-9 Using short-term financing for part of long-term needs PPT 6-11 Dollars Temporary current assets -term financing Permanent current assets Long-term financing Capital assets (debt & equity) Time period Limited 2000

21 Figure 6-11 A. Flat yield curve, March 1999 PPT 6-12 Percent Years Limited 2000

22 Figure 6-11(2) A. Normal yield curve, July 1993 PPT 6-12 Limited 2000

23 Figure 6-11(3) C. Inverted yield curve, December 1989 PPT 6-12 Limited 2000

24 Figure 6-12 Long-term and short-term interest rates PPT 6-13 Limited 2000

25 Table 6-7 Alternative financing plans EDWARDS CORPORATION Plan A Plan B Part 1. Current assets Temporary $250,000 $250,000 Permanent , ,000 Total current assets , ,000 -term financing (6%).. 500, ,000 Long-term financing (10%) ,000 $500,000 $500,000 Part 2. Capital assets Plant and equipment.... $100,000 $100,000 Long-term financing (10%). $100,000 $100,000 PPT 6-14 Part 3. Total financing (summary of parts 1 & 2) -term (6%)..... $500,000 $150,000 Long-term (10% , ,000 $600,000 $600,000 Limited 2000

26 Table 6-8 Impact of financing plans on earnings EDWARDS CORPORATION Plan A Earnings before interest and taxes $200,000 Interest (short-term), 6% $500,000 30,000 Interest (long-term), 10% $100,000 10,000 Earnings before taxes 160,000 Taxes (50%) 80,000 Earnings aftertaxes $ 80,000 Plan B Earnings before interest and taxes $200,000 Interest (short-term), 6% $150,000 9,000 Interest (long-term), 10% $450,000 45,000 Earnings before taxes 146,000 Taxes (50%) 73,000 Earnings aftertaxes $ 73,000 PPT 6-14 Limited 2000

27 Table 6-9 Expected returns under different economic conditions EDWARDS CORPORATION PPT Normal Expected higher return Probability of Expected conditions under Plan A normal conditions outcome $7, = + $5, Tight Expected lower return Probability of money under Plan A tight money ($15,000).20 = (3,000) Expected value of return for Plan A versus Plan B = +$2,600 Limited 2000

28 Table 6-10 Expected returns for high-risk firm PPT 6-15 EDWARDS CORPORATION 1. Normal Expected higher return Probability of Expected conditions under Plan A normal conditions outcome $7, = +$5, Tight Expected lower return Probability of money under Plan A tight money ($50,000).20 = (10,000) Expected value of return for Plan A versus Plan B = ($4,400) Limited 2000

29 Table 6-11 Current asset liquidity and asset financing plan PPT 6-16 Asset Liquidity Financing Plan Low Liquidity High Liquidity 1 2 -term High Profit Moderate profit High risk Moderate risk 3 4 Long-term Moderate profit Low profit Moderate risk Low risk Limited 2000

30 Chapter 6 - Outline LT 6-1 What is Working Capital? Hedged Approach to Financing -Term vs. Long-Term Financing Term Structure of Interest Rates Working Capital Financing Plans Limited 2000

31 Working Capital LT 6-2 Working Capital is financing and controlling the current assets of a firm Sales growth often leads to a buildup in inventory and accounts receivable. Firm may require additional external financing Crucial to short-term success or failure of a business Limited 2000

32 Hedged Approach to Financing LT 6-3 Match liquidity (life) of your assets to the maturity (term) of your financing Means your assets will be generating cash when your liabilities come due Balanced Financing Temporary (seasonal) build-up in inventory and accounts receivable finance with trade credit, short-term bank loans, short-term notes payable Permanent (minimum) levels of inventory, receivables + Property and equipment, long-term investments finance with long-term loans, leases, bonds, capital stock, retained earnings Limited 2000

33 -Term vs. Long-Term Financing LT 6-4 -term financing is less expensive but riskier lower interest rates short-term rates are volatile risk of default if sales slow down risk that bank may not extend / renew loans Long-term financing is more expensive but less risky usually higher interest rates, you may pay interest on funds you don t always need you have capital at all times Firm must decide the appropriate mix Limited 2000

34 Term Structure of Interest Rates LT 6-5 The Term Structure of Interest Rates is also known as the Yield Curve A graph showing the interest rate for Government of Canada securities with different maturity dates Normally, long-term rates are higher than short-term rates Limited 2000

35 Working Capital Financing Plans LT 6-6 A moderate (balanced) firm: S/T financing and high liquidity OR L/T financing and low liquidity An aggressive (risky) firm: S/T financing and low liquidity A conservative (safe or cautious) firm: L/T financing and high liquidity Appropriate strategy is determined based on company s tolerance for risk Limited 2000

Chapter 14. Working Capital Policy

Chapter 14. Working Capital Policy Chapter 14 Working Capital Policy 1 Learning Outcomes Chapter 14 Discuss why working capital is needed and how working capital accounts are related. Describe the cash conversion cycle and how it can be

More information

Chapter 9 Solutions to Problems

Chapter 9 Solutions to Problems Chapter 9 Solutions to Problems 1. a. Cash and cash equivalents are cash in hand and in banks, plus money market securities with maturities of 90 days or less. Accounts receivable are claims on customers

More information

Chapter Financial Forecasting

Chapter Financial Forecasting Chapter Financial Forecasting PPT 4-2 Chapter 4 - Outline What is Financial Forecasting? 3 Financial Statements for Forecasting Constructing Pro Forma Statements Basis for Sales Projections Steps in a

More information

v. Other things held constant, which of the following will cause an increase in working capital?

v. Other things held constant, which of the following will cause an increase in working capital? Net working capital i. Net working capital may be defined as current assets minus current liabilities. This also defines the current ratio. Motives for holding cash ii. Firms hold cash balances in order

More information

Topic 4 Working Capital Management. 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital. 4.

Topic 4 Working Capital Management. 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital. 4. Topic 4 Working Capital Management 1. Concept of Working Capital 2. Measuring Working Capital and Net Working Capital 3. Optimization i i of Working Capital 4. Applications 80 Learning objectives This

More information

Working Capital Management

Working Capital Management Working Capital Management Gitman and Hennessey, Chapter 14 Spring 2004 14.1 Net Working Capital Fundamentals In 2002, current assets accounted for 31.7% of non-financial Canadian corporations total assets.

More information

Working Capital Management

Working Capital Management Working Capital Management Gitman and Hennessey, Chapter 14 Spring 2004 14.1 Net Working Capital Fundamentals In 2002, current assets accounted for 31.7% of non-financial Canadian corporations total assets.

More information

Short Term Finance and Planning. Sources and Uses of Cash

Short Term Finance and Planning. Sources and Uses of Cash Short Term Finance and Planning (Text reference: Chapter 27) Topics sources and uses of cash operating cycle and cash cycle short term financial policy cash budgeting short term financial planning AFM

More information

Analysis One Code Desc. Transaction Amount. Fiscal Period

Analysis One Code Desc. Transaction Amount. Fiscal Period Analysis One Code Desc Transaction Amount Fiscal Period 57.63 Oct-12 12.13 Oct-12-38.90 Oct-12-773.00 Oct-12-800.00 Oct-12-187.00 Oct-12-82.00 Oct-12-82.00 Oct-12-110.00 Oct-12-1115.25 Oct-12-71.00 Oct-12-41.00

More information

HOSPIRA (HSP US) HISTORICAL COMMON STOCK PRICE INFORMATION

HOSPIRA (HSP US) HISTORICAL COMMON STOCK PRICE INFORMATION 30-Apr-2004 28.35 29.00 28.20 28.46 28.55 03-May-2004 28.50 28.70 26.80 27.04 27.21 04-May-2004 26.90 26.99 26.00 26.00 26.38 05-May-2004 26.05 26.69 26.00 26.35 26.34 06-May-2004 26.31 26.35 26.05 26.26

More information

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements

UNDERSTANDING WHERE YOU STAND. A Simple Guide to Your Company s Financial Statements UNDERSTANDING WHERE YOU STAND A Simple Guide to Your Company s Financial Statements Contents INTRODUCTION One statement cannot diagnose your company s financial health. Put several statements together

More information

CHAPTER 27. Short-Term Financial Planning. Chapter Synopsis

CHAPTER 27. Short-Term Financial Planning. Chapter Synopsis CHAPTER 27 Short-Term Financial Planning Chapter Synopsis 27.1 Forecasting Short-Term Financing Needs The first step in short-term financial planning is to forecast the company s future cash flows. This

More information

Planning your cash flow

Planning your cash flow 5 Planning your cash flow PROFITS ARE NOT CASH 80 OPERATING CYCLE 81 CASH FLOW BUDGETING 82 TRADE DEBTORS 87 TRADING STOCK 89 OVERCOMING CASH FLOW PROBLEMS 91 MINIMUM CASH RESERVE 92 If the cash flowing

More information

MASTER BUDGET - EXAMPLE

MASTER BUDGET - EXAMPLE MASTER BUDGET - EXAMPLE Sales IN UNITS for the previous two months (of last quarter), as well as the sales forecast for next quarter are as follows: Sales Budget Units May sales (ACTUAL) 20 June sales

More information

Chapter 12 Forecasting and Short- Term Financial Planning

Chapter 12 Forecasting and Short- Term Financial Planning Chapter 12 Forecasting and Short- Term Financial Planning LEARNING OBJECTIVES 1. Understand the sources and uses of cash in building a cash budget. 2. Explain how companies use sales forecasts to predict

More information

CHAPTER 17 Short-Term Financing

CHAPTER 17 Short-Term Financing 17-1 17-2 CHAPTER 17 Short-Term Financing Working capital financing policies Accounts payable (trade credit) Commercial paper Short-term bank loans Secured short-term credit Working Capital Financing Policies

More information

Median and Average Sales Prices of New Homes Sold in United States

Median and Average Sales Prices of New Homes Sold in United States Jan 1963 $17,200 (NA) Feb 1963 $17,700 (NA) Mar 1963 $18,200 (NA) Apr 1963 $18,200 (NA) May 1963 $17,500 (NA) Jun 1963 $18,000 (NA) Jul 1963 $18,400 (NA) Aug 1963 $17,800 (NA) Sep 1963 $17,900 (NA) Oct

More information

FINANCIAL MANAGEMENT (PART-7) WORKING CAPITAL MANAGEMENT PART 2

FINANCIAL MANAGEMENT (PART-7) WORKING CAPITAL MANAGEMENT PART 2 FINANCIAL MANAGEMENT (PART-7) WORKING CAPITAL MANAGEMENT PART 2 1. INTRODUCTION Dear Students, Welcome to the lecture series on financial management. Today in this lecture we shall cover the topic Working

More information

THE UNIVERSITY OF BOLTON

THE UNIVERSITY OF BOLTON JANUARY Jan 1 6.44 8.24 12.23 2.17 4.06 5.46 Jan 2 6.44 8.24 12.24 2.20 4.07 5.47 Jan 3 6.44 8.24 12.24 2.21 4.08 5.48 Jan 4 6.44 8.24 12.25 2.22 4.09 5.49 Jan 5 6.43 8.23 12.25 2.24 4.10 5.50 Jan 6 6.43

More information

NATIONAL CREDIT UNION SHARE INSURANCE FUND

NATIONAL CREDIT UNION SHARE INSURANCE FUND NATIONAL CREDIT UNION SHARE INSURANCE FUND PRELIMINARY & UNAUDITED FINANCIAL HIGHLIGHTS RENDELL L. JONES CHIEF FINANCIAL OFFICER MANAGEMENT OVERVIEW Balance Sheet Other - Insurance and Guarantee Program

More information

tutor2u Cash Management How and Why Businesses Need to Manage their Cash AS & A2 Business Studies PowerPoint Presentations 2005

tutor2u Cash Management How and Why Businesses Need to Manage their Cash AS & A2 Business Studies PowerPoint Presentations 2005 Cash Management How and Why Businesses Need to Manage their Cash AS & A2 Business Studies PowerPoint Presentations 2005 Importance of Cash (1) A business can exist for a while without making profits but

More information

Lecture 13 Working Capital Management and Credit Issues

Lecture 13 Working Capital Management and Credit Issues Lecture 13 - Working Capital Management Gross working capital: Net working capital: BASIC DEFINITIONS Total current assets. Net operating working capital (NOWC): Operating CA Operating CL = Current assets

More information

Need to know finance

Need to know finance Need to know finance You can t hide from it Every decision has financial implications Estimating sales and cost of sales (aka direct costs) Gross Profit and Gross Profit Margin (GPM) Sales cost of sales

More information

LEBANESE ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS MANAGERIAL ACCOUNTING

LEBANESE ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS MANAGERIAL ACCOUNTING LEBANESE ASSOCIATION OF CERTIFIED PUBLIC ACCOUNTANTS MANAGERIAL ACCOUNTING JULY 2015 MULTIPLE CHOICE QUESTIONS (37.5%) Choose the correct answer 1. All of the following statements concerning standard costs

More information

BUSINESS LOAN APPLICATION

BUSINESS LOAN APPLICATION BUSINESS LOAN APPLICATION Superior National Bank & Trust Company 235 Quincy Street, P.O. Box 450 Hancock, MI 49930 phone 906.482.0404 toll-free 1.866.482.0404 1 INTRODUCTION Thank you for considering Superior

More information

Economic Factors Affecting Small Business Lending and Loan Guarantees

Economic Factors Affecting Small Business Lending and Loan Guarantees Order Code RL34400 Economic Factors Affecting Small Business Lending and Loan Guarantees February 28, 2008 N. Eric Weiss Analyst in Financial Economics Government & Finance Division Economic Factors Affecting

More information

Answer of Multiple Choice Questions 1. (A) 2. (A) 3. (B) 4. (A) 5. (D) 6. (C) 7. (D) 8 (A) 9 (B) 10 (A)

Answer of Multiple Choice Questions 1. (A) 2. (A) 3. (B) 4. (A) 5. (D) 6. (C) 7. (D) 8 (A) 9 (B) 10 (A) 1. is concerned with the acquisition, financing, and management of assets with some overall goal in mind. A. Financial management B. Profit maximization C. Agency theory D. Social responsibility 2. Jensen

More information

Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research

Fixed Income 2015 Update. Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research Fixed Income 2015 Update Kathy Jones, Senior Vice President Chief Fixed Income Strategist, Schwab Center for Financial Research 1 Fed: Slow and Low 2015 Fixed Income Outlook 2 Yield Curve Flattening 3

More information

Construction Economics & Finance. Module 6. Lecture-1

Construction Economics & Finance. Module 6. Lecture-1 Construction Economics & Finance Module 6 Lecture-1 Financial management: Financial management involves planning, allocation and control of financial resources of a company. Financial management is essential

More information

Chapter 3 Cash Flow and Financial Planning

Chapter 3 Cash Flow and Financial Planning Chapter 3 Cash Flow and Financial Planning Solutions to Problems P3-1. LG 1: Depreciation Basic Year Depreciation Schedule Cost (1) Percentages from Table 3.2 (2) Depreciation [(1) (2)] (3) Asset A 1 $17,000

More information

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle

9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9. Short-Term Liquidity Analysis. Operating Cash Conversion Cycle 9.1 Current Assets and 9.1.1 Cash A firm should maintain as little cash as possible, because cash is a nonproductive asset. It earns no

More information

It is concerned with decisions relating to current assets and current liabilities

It is concerned with decisions relating to current assets and current liabilities It is concerned with decisions relating to current assets and current liabilities Best Buy Co, NA s largest consumer electronics retailer, has performed extremely well over the past decade. Its stock sold

More information

Econ 330 Exam 1 Name ID Section Number

Econ 330 Exam 1 Name ID Section Number Econ 330 Exam 1 Name ID Section Number MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question. 1) If during the past decade the average rate of monetary growth

More information

Brief Report on Closing of Accounts (connection) for the Term Ended March 31, 2007

Brief Report on Closing of Accounts (connection) for the Term Ended March 31, 2007 MARUHAN Co., Ltd. Brief Report on Closing of (connection) for the Term Ended March 31, 2007 (Amounts less than 1 million yen omitted) 1.Business Results for the term ended on March, 2007 (From April 1,

More information

Financial. Management FOR A SMALL BUSINESS

Financial. Management FOR A SMALL BUSINESS Financial Management FOR A SMALL BUSINESS 1 Agenda Welcome, Pre-Test, Agenda, and Learning Objectives Benefits of Financial Management Budgeting Bookkeeping Financial Statements Business Financing Key

More information

Cash Flow Projection for Operating Loan Determination

Cash Flow Projection for Operating Loan Determination E-19 RM-7.0 02-09 Risk Management Cash Flow Projection for Operating Loan Determination Danny Klinefelter and Dean McCorkle* A cash flow statement can be simply described as a record of the dollars coming

More information

The Basic Framework of Budgeting

The Basic Framework of Budgeting Master Budgeting 1 The Basic Framework of Budgeting A budget is a detailed quantitative plan for acquiring and using financial and other resources over a specified forthcoming time period. 1. The act of

More information

Overview of Business Results for the 2nd Quarter of Fiscal Year Ending March 31, 2012 (2Q FY2011)

Overview of Business Results for the 2nd Quarter of Fiscal Year Ending March 31, 2012 (2Q FY2011) November 8, 2011 Overview of Business Results for the 2nd Quarter of Fiscal Year Ending March 31, 2012 () Name of the company: Iwatani Corporation Share traded: TSE, OSE, and NSE first sections Company

More information

CHAPTER 27 PRINCIPLES OF WORKING CAPITAL MANAGEMENT

CHAPTER 27 PRINCIPLES OF WORKING CAPITAL MANAGEMENT CHAPTER 27 PRINCIPLES OF WORKING CAPITAL MANAGEMENT Q.1 Explain the concept of working capital. Are gross and net concepts of working capital exclusive? Discuss. A.1 Working capital signifies money required

More information

Planning your cash flow

Planning your cash flow Planning your cash flow Business Coach series Preparing the cash flow forecast Keeping on track Business Coach series The cash flow process The situation Money goes out earlier and faster than it comes

More information

CIMA F3 Course Notes. Chapter 3. Short term finance

CIMA F3 Course Notes. Chapter 3. Short term finance CIMA F3 Course Notes c Chapter 3 Short term finance Personal use only - not licensed for use on courses 31 1. Conservative, Aggressive and Matching strategies There are three over-riding approaches to

More information

Financial Projections. Making sense of the money

Financial Projections. Making sense of the money Financial Projections Making sense of the money The Burning Questions What are your capital needs? Projections How will you get that capital? Structure: Equity or debt? Ownership structure Up-front or

More information

Financial Statement Consolidation

Financial Statement Consolidation Financial Statement Consolidation We will consolidate the previously completed worksheets in this financial plan. In order to complete this section of the plan, you must have already completed all of the

More information

CHAPTER 8. Reporting and Analyzing Receivables ANSWERS TO QUESTIONS

CHAPTER 8. Reporting and Analyzing Receivables ANSWERS TO QUESTIONS CHAPTER 8 Reporting and Analyzing Receivables ANSWERS TO QUESTIONS 1. Accounts receivable are amounts customers owe on account. They result from the sale of goods and services (i.e., in trade). Notes receivable

More information

Contribution 787 1,368 1,813 983. Taxable cash flow 682 1,253 1,688 858 Tax liabilities (205) (376) (506) (257)

Contribution 787 1,368 1,813 983. Taxable cash flow 682 1,253 1,688 858 Tax liabilities (205) (376) (506) (257) Answers Fundamentals Level Skills Module, Paper F9 Financial Management June 2012 Answers 1 (a) Calculation of net present value (NPV) As nominal after-tax cash flows are to be discounted, the nominal

More information

Learning Goal 26. bal. 62,300 3,000

Learning Goal 26. bal. 62,300 3,000 S1 Learning Goal 26 Multiple Choice 1. c Remember that any entry to the Accounts Receivable account also requires an entry to a subsidiary account. 2. b 3. d Only the direct write-off method debits an

More information

MANAGING YOUR BUSINESS S CASH FLOW. Managing Your Business s Cash Flow. David Oetken, MBA CPM

MANAGING YOUR BUSINESS S CASH FLOW. Managing Your Business s Cash Flow. David Oetken, MBA CPM MANAGING YOUR BUSINESS S CASH FLOW Managing Your Business s Cash Flow David Oetken, MBA CPM 1 2 Being a successful entrepreneur takes a unique mix of skills and practices. You need to generate exciting

More information

CHAPTER 21. Working Capital Management

CHAPTER 21. Working Capital Management CHAPTER 21 Working Capital Management 1 Topics in Chapter Alternative working capital policies Cash, inventory, and A/R management Accounts payable management Short-term financing policies Bank debt and

More information

SOLUTIONS TO END-OF-CHAPTER PROBLEMS. Chapter 17

SOLUTIONS TO END-OF-CHAPTER PROBLEMS. Chapter 17 SOLUTIONS TO END-OF-CHAPTER PROBLEMS Chapter 17 3 360 17-1 Nominal cost of trade credit 97 30-15 0.0309 24 0.7423 74.23%. Effective cost of trade credit (1.0309) 24-1.0 1.0772 107.72%. 17-2 Effective cost

More information

Multiple Choice Questions (45%)

Multiple Choice Questions (45%) Multiple Choice Questions (45%) Choose the Correct Answer 1. The following information was taken from XYZ Company s accounting records for the year ended December 31, 2014: Increase in raw materials inventory

More information

Chapter Sources of Short-Term Financing

Chapter Sources of Short-Term Financing Chapter Sources of Short-Term Financing Chapter 8 - Outline PPT 8-2 Sources of Short-Term Financing Trade Credit from Suppliers Net Credit Position Chartered Banks in Canada Types of Short-term Loans Interest

More information

Fundamentals Level Skills Module, Paper F9. Section A. Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50

Fundamentals Level Skills Module, Paper F9. Section A. Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50 Answers Fundamentals Level Skills Module, Paper F9 Financial Management December 2014 Answers Section A 1 A Monetary value of return = $3 10 x 1 197 = $3 71 Current share price = $3 71 $0 21 = $3 50 2

More information

Small Business Lending *

Small Business Lending * Reserve Small Business Bank of Lending Australia Bulletin Small Business Lending * These notes were prepared in response to a request from the House of Representatives Standing Committee on Financial Institutions

More information

OPERATING FUND. PRELIMINARY & UNAUDITED FINANCIAL HIGHLIGHTS September 30, 2015 RENDELL L. JONES CHIEF FINANCIAL OFFICER

OPERATING FUND. PRELIMINARY & UNAUDITED FINANCIAL HIGHLIGHTS September 30, 2015 RENDELL L. JONES CHIEF FINANCIAL OFFICER PRELIMINARY & UNAUDITED FINANCIAL HIGHLIGHTS September 30, 2015 RENDELL L. JONES CHIEF FINANCIAL OFFICER MANAGEMENT OVERVIEW September 30, 2015 Balance Sheet Cash and cash equivalents had a month-end balance

More information

Chapter. Working capital

Chapter. Working capital Chapter 10 Working capital 1 10.1 Working capital Working capital is the capital available for conducting the day-to-day operations of the business and consists of current assets and current liabilities.

More information

AT&T Global Network Client for Windows Product Support Matrix January 29, 2015

AT&T Global Network Client for Windows Product Support Matrix January 29, 2015 AT&T Global Network Client for Windows Product Support Matrix January 29, 2015 Product Support Matrix Following is the Product Support Matrix for the AT&T Global Network Client. See the AT&T Global Network

More information

2004 THIRD QUARTER REPORT TO UNITHOLDERS

2004 THIRD QUARTER REPORT TO UNITHOLDERS 2004 THIRD QUARTER REPORT TO UNITHOLDERS Report to Unitholders The North West Company Fund reports third quarter earnings to October 30, 2004 of $11.0 million, an increase of 3.2% compared to last year

More information

Business Plan. Your Business Name

Business Plan. Your Business Name Business Plan Your Business Name Owners Address City, ST ZIP Code Telephone Fax E-Mail Date: Page 2 II. Executive Summary Write this section last. We suggest that you make it one page long; two pages max.

More information

BUSINESS PLAN GUIDE. Send completed business plans to:

BUSINESS PLAN GUIDE. Send completed business plans to: BUSINESS PLAN GUIDE Send completed business plans to: Waubetek Business Development Corporation 6 Rainbow Ridge Road P.O. Box 209 Birch Island, ON P0P 1A0 1-800-665-2248 toll-free (705) 285-4275 phone

More information

CASH FLOW STATEMENT (AND FINANCIAL STATEMENT)

CASH FLOW STATEMENT (AND FINANCIAL STATEMENT) CASH FLOW STATEMENT (AND FINANCIAL STATEMENT) - At the most fundamental level, firms do two different things: (i) They generate cash (ii) They spend it. Cash is generated by selling a product, an asset

More information

Inventory period: The length of time required to produce and sell the product.

Inventory period: The length of time required to produce and sell the product. FIN 301 Class Notes Chapter 19: Short-Term Financial Planning Operating Cycle Purchasing resources from suppliers Producing the product Distributing the product to customers Create cash flows: Unsynchronized:

More information

Paper F9. Financial Management. Fundamentals Pilot Paper Skills module. The Association of Chartered Certified Accountants

Paper F9. Financial Management. Fundamentals Pilot Paper Skills module. The Association of Chartered Certified Accountants Fundamentals Pilot Paper Skills module Financial Management Time allowed Reading and planning: Writing: 15 minutes 3 hours ALL FOUR questions are compulsory and MUST be attempted. Do NOT open this paper

More information

INVESTING IN NZ BONDS

INVESTING IN NZ BONDS INVESTING IN NZ BONDS August 2008 Summary Historically active NZ bond managers have achieved returns about 0.6% p.a., before tax and fees, above that of the NZ government stock index. While on the surface

More information

Chapter 019 Short-Term Finance and Planning

Chapter 019 Short-Term Finance and Planning Multiple Choice Questions 1. The length of time between the acquisition of inventory and the collection of cash from receivables is called the: a. operating cycle. b. inventory period. c. accounts receivable

More information

SOLUTIONS. Learning Goal 30

SOLUTIONS. Learning Goal 30 S1 Learning Goal 30 Multiple Choice 1. c A corporation wants to reissue treasury stock at a higher price than it paid. In this way, a greater amount of capital can be obtained than was returned to the

More information

(Formerly CVTech Group Inc.)

(Formerly CVTech Group Inc.) (Formerly CVTech Group Inc.) Condensed Interim Consolidated Financial Statements For the three months ended, 2014 Consolidated Statement of Financial Position (in thousands of Canadian dollars) December

More information

1. Define the operating and cash cycles. Why are they important?

1. Define the operating and cash cycles. Why are they important? Short-Term Planning Learning Objectives 1. Define the operating and cash cycles. Why are they important? 2. Define the different types of short-term financial policy 3. Understand the essentials of short-term

More information

Performance Review for Electricity Now

Performance Review for Electricity Now Performance Review for Electricity Now For the period ending 03/31/2008 Provided By Mark Dashkewytch 780-963-5783 Report prepared for: Electricity Now Industry: 23821 - Electrical Contractors Revenue:

More information

RETHINKING RISK AVERSION

RETHINKING RISK AVERSION RETHINKING RISK AVERSION Modern Asset/Liability Management Terry Hull, The University of Texas System Amy Kweskin, Washington University Alex Wright, JPMorgan Diana Hoadley, JPMorgan Established vs. Emerging

More information

BUSINESS PLAN TEMPLATE

BUSINESS PLAN TEMPLATE iplanner.net Small Business Plans Online BUSINESS PLAN TEMPLATE For a start-up company 18/01/2012 12:33:19(GMT) Executive Summary... 3 Business Overview... 3 Products and Services... 3 Sales Forecast...

More information

Vol. 1, Chapter 3 - Accounting Adjustments

Vol. 1, Chapter 3 - Accounting Adjustments Vol. 1, Chapter 3 - Accounting Adjustments Problem 1 1. ($20,000 2,000) 48 = $375 per month 2. Jan. 31 Depreciation Expense $375 Accumulated Depreciation Van $375 To record depreciation expense for January

More information

Knowledge is Power The Business Mindset The nitty gritty of understanding your cash flow CCIQ Webinar 28 October 2015

Knowledge is Power The Business Mindset The nitty gritty of understanding your cash flow CCIQ Webinar 28 October 2015 Knowledge is Power The Business Mindset The nitty gritty of understanding your cash flow CCIQ Webinar 28 October 2015 Webinar Presenter Jason Krenske Partner at Ulton Jason has worked with many businesses

More information

Chapter 4. Completing the accounting cycle

Chapter 4. Completing the accounting cycle 1 Chapter 4 Completing the accounting cycle 2 Learning objectives 1. Prepare an accounting worksheet and describe its purpose 2. Prepare a classified balance sheet and explain the major headings 3. Explain

More information

SMALL BUSINESS DEVELOPMENT CENTER RM. 032

SMALL BUSINESS DEVELOPMENT CENTER RM. 032 SMALL BUSINESS DEVELOPMENT CENTER RM. 032 FINANCING THROUGH COMMERCIAL BANKS Revised January, 2013 Adapted from: National Federation of Independent Business report Steps to Small Business Financing Jeffrey

More information

CHAPTER 16 Current Asset Management and Financing

CHAPTER 16 Current Asset Management and Financing Copyright 2008 by the Foundation of the American College of Healthcare Executives 6/13/07 Version 16-1 CHAPTER 16 Current Asset Management and Financing Investment and financing policies Cash and marketable

More information

Sources of Short-Term Financing C H A P T E R E I G H T

Sources of Short-Term Financing C H A P T E R E I G H T Sources of -Term Financing C H A P T E R E I G H T Figure 8-1 Structure of corporate debt, 1998 PPT 8-1 35% 30% 25% 20% 15% 10% 5% 0% Accounts payable Bank loans Other short term loans term paper Bonds

More information

Chapter 18 Working Capital Management

Chapter 18 Working Capital Management Chapter 18 Working Capital Management Slide Contents Learning Objectives Principles Used in This Chapter 1. Working Capital Management and the Risk- Return Tradeoff 2. Working Capital Policy 3. Operating

More information

Dealing With Your Banker &

Dealing With Your Banker & Dealing With Your Banker & Other Lenders Your financing The success or failure of your business will depend on whether or not you have enough capital to: buy the equipment and inventory you need; pay overhead

More information

RELEVANT TO ACCA QUALIFICATION PAPER F9

RELEVANT TO ACCA QUALIFICATION PAPER F9 RELEVANT TO ACCA QUALIFICATION PAPER F9 Analysing the suitability of financing alternatives The requirement to analyse suitable financing alternatives for a company has been common in Paper F9 over the

More information

Canadian Life Insurance Industry

Canadian Life Insurance Industry A.M. Best Company s 9 th Annual Insurance Market Briefing Canada Canadian Life Insurance Industry Edward Kohlberg, CPA, FLMI Senior Financial Analyst Richard McMillan Senior Financial Analyst September

More information

7 Management of Working Capital

7 Management of Working Capital 7 Management of Working Capital BASIC CONCEPTS AND FORMULAE 1. Working Capital Management Working Capital Management involves managing the balance between firm s shortterm assets and its short-term liabilities.

More information

Chapter 18 Working Capital Management

Chapter 18 Working Capital Management Chapter 18 Working Capital Management Slide Contents Learning Objectives Principles Used in This Chapter 1. Working Capital Management and the Risk-Return Tradeoff 2. Working Capital Policy 3. Operating

More information

NAV HISTORY OF DBH FIRST MUTUAL FUND (DBH1STMF)

NAV HISTORY OF DBH FIRST MUTUAL FUND (DBH1STMF) NAV HISTORY OF DBH FIRST MUTUAL FUND () Date NAV 11-Aug-16 10.68 8.66 0.38% -0.07% 0.45% 3.81% 04-Aug-16 10.64 8.66-0.19% 0.87% -1.05% 3.76% 28-Jul-16 10.66 8.59 0.00% -0.34% 0.34% 3.89% 21-Jul-16 10.66

More information

CREDIT UNION TRENDS REPORT

CREDIT UNION TRENDS REPORT CREDIT UNION TRENDS REPORT CUNA Mutual Group Economics July 2 (May 2 data) Highlights First quarter data revisions were modest. The number of credit unions was revised down by and assets and loans were

More information

Financial Results for the First Quarter Ended June 30, 2014

Financial Results for the First Quarter Ended June 30, 2014 July 28, 2014 Company name : Nissan Motor Co., Ltd. Code no : 7201 (URL http://www.nissan-global.com/en/ir/) Representative : Carlos Ghosn, President Contact person : Joji

More information

of Fiscal 2006 (Consolidated)

of Fiscal 2006 (Consolidated) Outline of Financial Results for the 3rd Quarter of Fiscal 2006 (Consolidated) Feb.3, 2006 For Immediate Release Company Name (URL http://www.fhi.co./jp/fina/index.html ) : Fuji Heavy Industries Ltd. (Code

More information

Cash flow lesson suggestions & activities - CIMA

Cash flow lesson suggestions & activities - CIMA Cash flow lesson suggestions & activities - CIMA Learning outcomes Students should... Understand the structure of a cash flow forecast (AO1) and evaluate cash flow forecasts as decision making tools (AO3/4)

More information

Financial Ratios and Quality Indicators

Financial Ratios and Quality Indicators Financial Ratios and Quality Indicators From U.S. Small Business Administration Online Women's Business Center If you monitor the ratios on a regular basis you'll gain insight into how effectively you

More information

EMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED)

EMERSON AND SUBSIDIARIES CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) CONSOLIDATED OPERATING RESULTS (AMOUNTS IN MILLIONS EXCEPT PER SHARE, UNAUDITED) TABLE 1 Quarter Ended March 31, Percent Change Net Sales $ 5,854 $ 5,919 1% Costs and expenses: Cost of sales 3,548 3,583

More information

Quarterly Financial Results for the Fiscal Year Ending September 30, 2016 (J-GAAP)

Quarterly Financial Results for the Fiscal Year Ending September 30, 2016 (J-GAAP) February 10, 2016 Quarterly Financial Results for the Fiscal Year Ending September 30, 2016 (J-GAAP) (1st Quarter / October 1, 2015 December 31, 2015) Company Name Hosokawa Micron Corporation Stock Exchange

More information

Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf

Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Ipx!up!hfu!uif Dsfeju!zpv!Eftfswf Credit is the lifeblood of South Louisiana business, especially for the smaller firm. It helps the small business owner get started, obtain equipment, build inventory,

More information

QBE INSURANCE GROUP Annual General Meeting 2009. All amounts in Australian dollars unless otherwise stated.

QBE INSURANCE GROUP Annual General Meeting 2009. All amounts in Australian dollars unless otherwise stated. Annual General Meeting 2009 All amounts in Australian dollars unless otherwise stated. John Cloney Chairman 2 Results of proxy voting A total of 4,874 valid proxy forms were received. The respective votes

More information

Question Bank. Working Capital Management

Question Bank. Working Capital Management Question Bank Working Capital Management UNIT-1-Basic concepts and overview of working capital Q1. What is meant by Working Capital Management? What are the determinants of Working Capital Management needs

More information

Financial Statements

Financial Statements Financial Statements The financial information forms the basis of financial planning, analysis & decision making for an organization or an individual. Financial information is needed to predict, compare

More information

Understanding A Firm s Financial Statements

Understanding A Firm s Financial Statements CHAPTER OUTLINE Spotlight: J&S Construction Company (http://www.jsconstruction.com) 1 The Lemonade Kids Financial statement (accounting statements) reports of a firm s financial performance and resources,

More information

ILLUSTRATION 17-1 CONVERTIBLE SECURITIES CONVERTIBLE BONDS

ILLUSTRATION 17-1 CONVERTIBLE SECURITIES CONVERTIBLE BONDS ILLUSTRATION 17-1 CONVERTIBLE SECURITIES CONVERTIBLE BONDS Issued ten, 8%, $1,000 par value bonds at 110. Each bond is convertible into 100 shares of $5 par value common. Entry at date of issue: Cash 11,000

More information

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS*

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS* COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) 2 Fixed Rates Variable Rates FIXED RATES OF THE PAST 25 YEARS AVERAGE RESIDENTIAL MORTGAGE LENDING RATE - 5 YEAR* (Per cent) Year Jan Feb Mar Apr May Jun

More information

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS*

COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) CHARTERED BANK ADMINISTERED INTEREST RATES - PRIME BUSINESS* COMPARISON OF FIXED & VARIABLE RATES (25 YEARS) 2 Fixed Rates Variable Rates FIXED RATES OF THE PAST 25 YEARS AVERAGE RESIDENTIAL MORTGAGE LENDING RATE - 5 YEAR* (Per cent) Year Jan Feb Mar Apr May Jun

More information