Working Capital Management PDF

CHAPTER4 : Working capital management 4. 1. Overview...

CHAPTER4 : Working capital management 4. 1. Overview of working capital management 4.1.1. Definition Net working capital = Current assets - Current liabilities current assets cash equivalent assets gross working capital ✗ * current = [ ( account receivable - working capital : the firm 's investment in current assets inventory capital the administration the firm 's - working management : of current + d- a'mboio kn tnanhtéanuia assets and the financing needed to support current assets ( ng-ah a.ir/d-oimboi thi&nghangtEnuhed-oiyduipv.usxud DN ① Maritain good financial health Classification By components , cash and marketable securities Receivable Inventory ① represents the minimum level og current assets by time permanent working capital ① lvénluiu d- required for ongoing operations Ing thinking auyén I additional capital needed @ represents the to temporary working capital ② vÉn huh d- tqm that meet short term fluctuations ex : holiday I Ing I - ,  4. 1.2. Working capital Policies that d- nén utéuhéuhñn Sein him d- ' - Relaxed Policy :( estar Ing not léngl : Relatively large amounts of cash. marketable securities , and inventories carried liberal credit level of are , and a policy results in a high receivables DN cain su? tang truong cao Restricted policy Ics toil sain win d- Ing that oh.at/:atoim.oinhu.an - securities inventories and receivables Holdings of cash , marketable. , are coristrained in Dinh Miroir ↑ moi Uo Policy Moderate Trung dung I DN - Ics got p phai rui ro tou Chinh Between relaxed and restricted policies ' d- drug hé  Ngvi.ec chiéu wing chiéu Financing c- short - financing term 4 1. 3 Financing models (.. I temporary try I - Maturity matching approach long term financing Conservative approach - - 1 permanent 1 sly - Aggressive approach Ngati very : hhooinnganho.in Borrowers creditors sé than think hah l thring long - term ji more stability more risky xiyen phai di ñmnguoin vayl;-) Chipwi ton vaydaihqncaehdnchipwilouvayngdnho.in d-Eius voy din hqnsé oh di.nu hah → cheipnho.in Chipwi core heh Ng Cho vdy : ngwo.cl Igi. Cho dai han sé ruirohdn vay Sip ' rien Chipwi che vay caehén \ current A temporary Niang ving gita nguén tou voi tou Sein lpermatnent current AI trp the maturity and liabilities Match of all assets short term or - : seasonal variations in current assets would be financed with short term financing i the permanent component of current assets and all fixed assets would be financed with long - term pin or with equity Reduce liquidity risk - - Hard to implement in practice giamtuiéuruiro temp s per High proportion the firm finances of long term financing a - : - portion of its expected seasonal funds requirement on a long - term giam LN gian rui ro. , basis tang hhoinang thanh tan less profitable since long term financing usually more expensive - ,  tichu.ie d-of us rui ro i cénñ LN hén / the firm has financed part High proportion g Short term financing : - - ay its permanent current assets with short term financing debt cheaper 7 but also more - More profitable 1 short term risky  4. 7. Cash l marketable securities management Motives cash * of holding transaction purpose : mu.cotichgiaedi.ch - precautionary purpose my c dich phong ng via : - Investment d-din ni purpose : - d- air cé , tich trÑ TH True milk VNM 4 hip - 20.000 4+1 - 20.000 Increase sales Co hot titi.EC sit dying tiénsémhén ' - - - Reduce inventory Competiveness - - Marketing Ving quay véinnhanh heh -  * Techniques of cash management speeding up cash receipts - Collection Improvements : earlier billing Offer discount - a rate for early payment tÉ d-& 1ha not tién - Digital payment : tang nhanh down cash slowing payouts Utilize the discount period : tan dying ti i d- a thin gian chief Uhoiu - " " - Playing the Float : hit sit dung heh rien loi.pngoinsachthuchitient.Etiinggiaid-oo.in - tinh toan vi. tri te uia Cash budgeting :. Chi ra ( thu VÉ : du' lhitatién dy bei al su' chi tien ' chi ra > thuvé : thiam hilt ) l DN rien cém.ua dich sit dying uhooin diiihiiadé ✗ than h.at : rien hinge! them - Holding too much cash tién.... Pros : liquidity and flexibility , reduced risk. stronger position and acquisitions increased in mergers. investor stability cons : missed investment opportunities , low Return on Assets. inflation erosion little cash Holding too - Pres : maximized investment growth higher ROA Optimizing Cash Flow in ,. Cons : liquidity risk inability to respond to opportunities higher. , borrowing costs damaged credit rating increased risk of ,. insolvency lphoi saint  d- éi hothay tou Sein cé and noting thank Uhooin care nhÑ : marketable securities Vakil C total cast of = Opportunity + Transaction cost { Chi pwigd cash I / C management cost luiéngtién Kui DN chyén d- tick + É d- a mid thanh iiénsecéchipwi -o time DM 9iÑ Nguy uhicvé 0 thing ay lap tiic AN b'ants chyén thanh ti Én gd ( Nets cé wiping tiénnñhéncthiseotgdéiu hi → ca ' 2 chipwi d- éué 'n di.nu : mu Éncwyén lot d- éu Chi making put ' veto catch cé and noting than nuhooincae d- ai lo tr hay C :[ ash balance a. Opportunity cost holding cash :tik? tailgate giuttién uiengiién ≤ tbDNgiÑ fixed @ § { T cost transaction 1- ✗ 2 : per pic, = ✗ + S: annually torment by / cash find C to minimize jcci 'ng → disbursement to : Wiping tiénianotén Owi - ' A.aohoimba.cl thee ethic { ' jcci :O Cox { + 1- ✗ I :O _ Txs 0 C 21-5 = = u o S = $1 billion - Optimal reserve amount 1- = $162.500 E- = 21-5 = 2×162.500×1*000,000 = 50 , ooo ooo $ , 0 13% 0 13%1 : year Cost 1- I 1.000.000,000 - of transaction : = = 162,500 × = 3,250000$ 50 , ooo ooo , CEO 50.000.000 ' 3% 3.250,000$ opportunity ✗ - Total cost : = = 2 2 - Total cost of holding cash : cost of transaction + Total opportunity cost = 3.250.000$ + 3,250.000$ = 6,500,000$  choc a' c met thanh toan he def béro tri pug → → put che ma chitiéuiéhé ' hog Ch ngoiyd-aoh.am phai dring us → pm Cho mat d- din tu DN thanh tan , ngoiy buÉc d- ém liquidity Marketability Ck ñay t.de ra 1 Cho tién rien ko quoi ?p ta Factors Rate of return veto IN safety trung Maturity : s.uiphu-h.dpuewih.in 111 phiéu who b.ae NN phélthoinh An : thinking phiéu nñcty cédanh liéng ' 111 : tot voi uy tin phétthanh Ing ? again ho.in ' d- é hey d- ' → céng us. n 131 Choi'p phiéu again hang : DN plhoinh nhving phat d? d- aim boio bet 1 NH 141 A&p d-Éng Repo : do NH or DN phat h-anh.ph di cé cam hltmnalqi 4. 3. Account Receivables management → tuning chiém time ng. cue ① 1- s via DM → coin phai quoin tri. tot Iq d- En tin dying → es 1 credit policy I - Credit standard lliéuchuoinl 4.3.1. Credit policies - credit term lotiéuuhooinl - Collection sales risk increased bad debts Increasing → +