公司理財教學(xué)課件：ch16 Working Capital Management

CHAPTER16

WorkingCapitalManagementAlternativeworkingcapitalpoliciesCash,inventory,andA/RmanagementAccountspayablemanagementShort-termfinancingpoliciesBankdebtandcommercialpaperBasicDefinitionsGrossworkingcapital:Totalcurrentassets.Networkingcapital:Currentassets-Currentliabilities.Netoperatingworkingcapital(NOWC):OperatingCA–OperatingCL=(Cash+Inv.+A/R)–(Accruals+A/P)(More…)Workingcapitalmanagement:Includesbothestablishingworkingcapitalpolicyandthentheday-to-daycontrolofcash,inventories,receivables,accruals,andaccountspayable.Workingcapitalpolicy:Thelevelofeachcurrentasset.Howcurrentassetsarefinanced.SelectedRatiosforSKISKI

IndustryCurrent 1.75x 2.25xQuick 0.83x 1.20xDebt/Assets 58.76% 50.00%Turnoverofcash 16.67x 22.22xDSO(365-daybasis) 45.63 32.00Inv.turnover 4.82x 7.00xF.A.turnover 11.35x 12.00xT.A.turnover 2.08x 3.00xProfitmargin 2.07% 3.50%ROE 10.45% 21.00%Payablesdeferral 30.00 33.00HowdoesSKI’sworkingcapitalpolicycomparewiththeindustry?Workingcapitalpolicyisreflectedinafirm’scurrentratio,quickratio,turnoverofcashandsecurities,inventoryturnover,andDSO.TheseratiosindicateSKIhaslargeamountsofworkingcapitalrelativetoitslevelofsales.Thus,SKIisfollowingarelaxedpolicy.IsSKIinefficientorjustconservative?Arelaxedpolicymaybeappropriateifitreducesriskmorethanprofitability.However,SKIismuchlessprofitablethantheaveragefirmintheindustry.Thissuggeststhatthecompanyprobablyhasexcessiveworkingcapital.Thecashconversioncyclefocusesonthetimebetweenpaymentsmadeformaterialsandlaborandpaymentsreceivedfromsales:CashInventoryReceivablesPayablesconversion=conversion+collection-deferral.cycleperiodperiodperiodCashConversionCycleCashConversionCycle(Cont.)CCC=+–CCC=+45.6–30CCC=75.7+45.6–30CCC=91.3days.DaysperyearInv.turnoverPayablesdeferralperiodDayssalesoutstanding3654.82CashManagement:

Cashdoesn’tearninterest,

sowhyholdit?Transactions:Musthavesomecashtopaycurrentbills.Precaution:“Safetystock.”Butlessenedbycreditlineandmarketablesecurities.Compensatingbalances:Forloansand/orservicesprovided.Speculation:Totakeadvantageofbargains,totakediscounts,andsoon.Reducedbycreditline,marketablesecurities.What’sthegoalofcashmanagement?Tohavesufficientcashonhandtomeettheneedslistedonthepreviousslide.However,sincecashisanon-earningasset,tohavenotonedollarmore.WaystoMinimizeCashHoldingsUselockboxes.Insistonwiretransfersfromcustomers.Synchronizeinflowsandoutflows.Usearemotedisbursementaccount.(More…)Increaseforecastaccuracytoreducetheneedforacash“safetystock.”Holdmarketablesecuritiesinsteadofacash“safetystock.”Negotiatealineofcredit(alsoreducesneedfora“safetystock”).CashBudget:ThePrimaryCashManagementToolPurpose:Usesforecastsofcashinflows,outflows,andendingcashbalancestopredictloanneedsandfundsavailablefortemporaryinvestment.Timing:Daily,weekly,ormonthly,dependinguponbudget’spurpose.Monthlyforannualplanning,dailyforactualcashmanagement.DataRequiredforCashBudget1. Salesforecast.2. Informationoncollectionsdelay.3. Forecastofpurchasesandpaymentterms.4. Forecastofcashexpenses:wages,taxes,utilities,andsoon.5. Initialcashonhand.6. Targetcashbalance.SKI’sCashBudgetforJanuaryandFebruaryNetCashInflowsJanuaryFebruaryCollections $67,651.95

$62,755.40Purchases 44,603.75 36,472.65Wages 6,690.56 5,470.90Rent 2,500.00

2,500.00Totalpayments $53,794.31

$44,443.55NetCF $13,857.64 $18,311.85CashBudget(Continued)JanuaryFebruaryCashatstartif

noborrowing $3,000.00 $16,857.64NetCF(slide13) 13,857.64

18,311.85Cumulativecash $16,857.64 $35,169.49Less:targetcash 1,500.00

1,500.00Surplus $15,357.64 $33,669.49Shoulddepreciationbeexplicitlyincludedinthecashbudget?No.Depreciationisanoncashcharge.Onlycashpaymentsandreceiptsappearoncashbudget.However,depreciationdoesaffecttaxes,whichdoappearinthecashbudget.Whataresomeotherpotentialcashinflowsbesidescollections?Proceedsfromfixedassetsales.Proceedsfromstockandbondsales.Interestearned.Courtsettlements.Howcaninterestearnedorpaidonshort-termsecuritiesorloansbeincorporatedinthecashbudget?Interestearned:Addlineinthecollectionssection.Interestpaid:Addlineinthepaymentssection.Foundasinterestratexsurplus/loanlineofcashbudgetforprecedingmonth.Note:Interestonanyotherdebtwouldneedtobeincorporatedaswell.Howcouldbaddebtsbeworkedintothecashbudget?Collectionswouldbereducedbytheamountofbaddebtlosses.Forexample,ifthefirmhad3%baddebtlosses,collectionswouldtotalonly97%ofsales.Lowercollectionswouldleadtolowersurplusesandhigherborrowingrequirements.SKI’sforecastedcashbudget

indicatesthatthecompany’scashholdingswillexceedthetargeted

cashbalanceeverymonth,exceptforOctoberandNovember.Cashbudgetindicatesthecompanyprobablyisholdingtoomuchcash.SKIcouldimproveitsEVAbyeitherinvestingitsexcesscashinmoreproductiveassetsorbypayingitouttothefirm’sshareholders.WhatreasonsmightSKIhaveformaintainingarelatively

highamountofcash?Ifsalesturnouttobeconsiderablylessthanexpected,SKIcouldfaceacashshortfall.Acompanymaychoosetoholdlargeamountsofcashifitdoesnothavemuchfaithinitssalesforecast,orifitisveryconservative.Thecashmaybethere,inpart,tofundaplannedfixedassetacquisition.InventoryManagement:

CategoriesofInventoryCostsCarryingCosts:Storageandhandlingcosts,insurance,propertytaxes,depreciation,andobsolescence.OrderingCosts:Costofplacingorders,shipping,andhandlingcosts.CostsofRunningShort:Lossofsales,lossofcustomergoodwill,andthedisruptionofproductionschedules.IsSKIholdingtoomuchinventory?SKI’sinventoryturnover(4.82)isconsiderablylowerthantheindustryaverage(7.00).Thefirmiscarryingalotofinventoryperdollarofsales.Byholdingexcessiveinventory,thefirmisincreasingitsoperatingcostswhichreducesitsNOPAT.Moreover,theexcessinventorymustbefinanced,soEVAisfurtherlowered.IfSKIreducesitsinventory,withoutadverselyaffectingsales,whateffectwillthishaveonitscashposition?Shortrun:Cashwillincreaseasinventorypurchasesdecline.Longrun:Companyislikelytothentakestepstoreduceitscashholdings.AccountsReceivableManagement:

DoSKI’scustomerspaymoreorlesspromptlythanthoseofitscompetitors?SKI’sdays’salesoutstanding(DSO)of45.6daysiswellabovetheindustryaverage(32days).SKI’scustomersarepayinglesspromptly.SKIshouldconsidertighteningitscreditpolicytoreduceitsDSO.CashDiscounts:Lowersprice.AttractsnewcustomersandreducesDSO.CreditPeriod:Howlongtopay?ShorterperiodreducesDSOandaverageA/R,butitmaydiscouragesales.ElementsofCreditPolicy(More…)CreditStandards:Tighterstandardsreducebaddebtlosses,butmayreducesales.FewerbaddebtsreducesDSO.CollectionPolicy:TougherpolicywillreduceDSO,butmaydamagecustomerrelationships.DoesSKIfaceanyriskifittightensitscreditpolicy?YES!Atightercreditpolicymaydiscouragesales.Somecustomersmaychoosetogoelsewhereiftheyarepressuredtopaytheirbillssooner.IfSKIsucceedsinreducingDSOwithoutadverselyaffectingsales,whateffectwouldthishaveonitscashposition?Shortrun:Ifcustomerspaysooner,thisincreasescashholdings.Longrun:Overtime,thecompanywouldhopefullyinvestthecashinmoreproductiveassets,orpayitouttoshareholders.BothoftheseactionswouldincreaseEVA.Isthereacosttoaccruals?Dofirmshavemuchcontroloveramountofaccruals?Accrualsarefreeinthatnoexplicitinterestischarged.Firmshavelittlecontroloverthelevelofaccruals.Levelsareinfluencedmorebyindustrycustom,economicfactors,andtaxlaws.Whatistradecredit?Tradecreditiscreditfurnishedbyafirm’ssuppliers.Tradecreditisoftenthelargestsourceofshort-termcredit,especiallyforsmallfirms.Spontaneous,easytoget,butcostcanbehigh.SKIbuys$506,985net,ontermsof1/10,net30,andpaysonDay40.Howmuchfreeandcostlytradecredit,andwhat’sthecostofcostlytradecredit?Netdailypurchases=$506,985/365=$1,389.Annualgrosspurch.=$506,985/(1-0.01) =$512,106Gross/NetBreakdownCompanybuysgoodsworth$506,985.That’sthecashprice.Theymustpay$5,121moreiftheydon’ttakediscounts.Thinkoftheextra$5,121asafinancingcostsimilartotheinterestonaloan.Wanttocomparethatcostwiththecostofabankloan.Payablesleveliftakediscount:Payables=$1,389(10)=$13,890.Payableslevelifdon’ttakediscount:Payables=$1,389(40)=$55,560.CreditBreakdown:

Totaltradecredit =

$55,560Freetradecredit =13,890Costlytradecredit =

$41,670NominalCostofCostlyTradeCreditButthe$5,121ispaidallduringtheyear,notatyear-end,soEARrateishigher.Firmloses0.01($512,106)=$5,121ofdiscountstoobtain$41,670inextratradecredit,sokNom==0.1229=12.29%.$5,121$41,670NominalCostFormula,1/10,net40Pays1.01%12.167timesperyear.Periodicrate=0.01/0.99=1.01%.Periods/year=365/(40–10)=12.1667.EAR =(1+Periodicrate)n–1.0 =(1.0101)12.1667–1.0=13.01%.EffectiveAnnualRate,1/10,net40Wo