清华大学公司财务讲义2

Cost of Goods Sold = $820,000
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Example - Operating Cycle
Inventory Period = 365 / Inventory Turnover
Inventory Turnover = COGS / Average inventory
making little investment in inventory granting restrictive credit term, which result in a
low level of receivables.
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Operating cycle = inventory period + accounts receivable period
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The Operating Cycle and the Cash Cycle
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Example - Cash Cycle
Accounts Payables Period = 365 / payables turnover
Payables turnover = COGS / Average AP
PT = 820,000 / 87,500 = 9.4 times
Accounts payables period = 365 / 9.4 = 39 days
Chapter 9 Working Capital Management (I)
----Overall Thinking of Working Capital Management
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Agenda
Basic concepts The Operating Cycle and the Cash Cycle
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Carrying versus Shortage Costs
Carrying costs
Opportunity cost of owning current assets versus long-term assets that pay higher returns
The Purpose of Working Capital Management
Alternative Current Asset Investment Policies
Alternative Working Capital Financing Policies
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Alternative Current Asset Investment Policies (continued)
Restrictive Current Asset Investment Policies :
keeping little balance of cash and marketable securities
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Overall Thinking of Working Capital Management
Basic concepts:
Working capital: refers to current assets
Net working capital: refers to current assets minus current liabilities
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Alternative Current Asset Investment Policies
Flexible Versus Restrictive current asset investment policies.
making large investment in inventory granting liberal credit term, which result in a high
level of receivables.
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The Cash Cycle
The time between payment for inventory and receipt from the sale of inventory
Cash cycle = operating cycle – accounts payable period
Accounts payable period = time between receipt of inventory and payment for it
RT = 1,150,000 / 180,000 = 6.4 times
Receivables Period = 365 / 6.4 = 57 days
Operating cycle = 111 + 57 = 168 days
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Investment in working capital
to maintain the efficient operation of the business
Short-term financing
to maintain the liquidity of the firm
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The Operating Cycle and the Cash Cycle
Inventory conversion period
Payables deferred period
Receivables collection period
Cash conversion cycle
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The Operating Cycle and the Cash Cycle
The Operating Cycle
The time it takes to receive inventory, sell it and collect on the receivables generated from the sale
29.7
Inventories
389.4 Current payments due on
long-term debt
46.2
Other current assets
120.5 Other current liab.8 Total
757.3
Net working capital (current assets-current liabilities) is $1,069.8-$757.3=$312.5 billion.
Beginning Ending Average
Inventory
200,000
300,000
250,000
Accounts Receivable
160,000
200,000
180,000
Accounts Payable
75,000
100,000
87,500
Net Sales = $1,150,000
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Alternative Current Asset Investment Policies
Flexible Current Asset Investment Policies.
keeping large balance of cash and marketable securities
fewer production stoppages.
costs of flexible policy:
require more capital to finance; opportunity cost is high; cost of maintaining the economic value of the item.
The cash cycle measures how long we need to finance inventory and receivables
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Example Information
Item
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Alternative Current Asset Investment Policies (continued)
Trade-off between a flexible one and a restrictive one:
benefits of flexible policy:
sales stimulated by liberal credit term; plentiful inventories provides quick delivery and