财务管理基础斯坦利布洛克Chapter(5)

PARTTHREEWorkingCapitalManagement--CurrentAssetManagement--Short-termFinancingLecturer:GURen2013.FallSCUT6ChapterIntroduction:WorkingCapital&theFinancingDecisionChapterOutlineI.Workingcapitalmanagement（P137-147）II.Short-termfinancing（P147-151，154-159）III.CostofDebt（P151-154）ChapterOutlineI.Workingcapitalmanagement——theoperatingandcashcyclesII.Short-termfinancingIII.CostofDebt(Net)workingcapitalisassociatedwithshort-termfinancialdecisionmaking.I.WorkingcapitalmanagementWhatis(net)workingcapital?--Networkingcapitalisthedifferencebetweencurrentassetsandcurrentliabilities.Positivecurrentassetexceedcurrentliabilitiescashthatwillbecomeavailableoverthenext12monthsexceedsthecashthatmustbepaidoverthesameperiod(I)TracingCashandNetWorkingCapital1.Understandingoperatingactivities:NatureofAssetGrowth•Understandingoperatingactivities•Effectivecurrentassetsmanagementrequiresmatchingoftheforecastedsalesandproductionschedules–Differencesinactualsalesandforecastedsales(production)canresultinunexpectedbuildup.AssetsFluctuationunderthedifferentconditionsofmatchingsalesandproduction(1)MatchsalesandproductionascloselyaspossibleintheshortrunAllowscurrentassetstoincreaseordecreasewiththelevelofsalesEliminatesthelargeseasonalbulgesorsharpreductionsincurrentassetsCondition:sales=productionCondition:sales≠production(2)Levelproductionmethod•Smoothproductionschedules•UseofmanpowerandequipmentefficientlytolowercostCurrentassethavethelargeseasonalbulgesorsharpreductionsincurrentassetsAnExampleCase:YawakuziMotorcycleCompanyCurrentAssetsunderLevelProductionTheYawakuzicompanyshowswhathappenswithseasonalsalesandlevelproduction.•Beginninginventory=800unitsProductionpermonth=9600/12=800unitsStepOne:YawakuziSalesForecast(inunits)StepTwo:Yawakuzi’sProductionScheduleandInventoryStepThreePPT6-5StepFour:TotalCurrentAssets,FirstYear($millions)Yawakuzi’sNatureofAssetGrowthLevelproductionwithactualseasonalsalesmakescurrentassethavethelargeseasonalbulgesorsharpreductionsincurrentassets.PPT6-7StepFive:CashBudgetandAssetsforIIYearWithNoGrowthinSales($millions)Fromtheforecase,wecouldknowthat…Firm’scurrentassetscouldbe:–Self-liquidating–“Permanent”currentassets.TheSimplestCase:Supposethatallofthefirm’scurrentassetswillbeself-liquidatingassets,thefirm’sworkingcapitalneedsaretrulyshort-term.MoreComplicatedCaseThefirmiscarryingnotonlyself-liquidatinginventory,butalsotheanomalyof“permanent”currentassets.a.permanentcurrentassets.b.“temporary”currentassets.Fixedassetsgrowslowlywith(1)Increaseinproductivecapacityand(2)replacementofoldequipmentCurrentassetsfluctuateintheshortrun,dependingon(1)bothaccountsreceivableandinventoryrisewhensalesincreaseasproductionincreases.(2)Levelofproductionversusthematchingsalesandproduction.II.Short-termfinancing1.Patternsoffinancing(threescenarios)andOptimalfinancingplans2.FinancialAspectsofWorkingCapitalManagement(1)Patternsoffinancing:Threescenarios(1-a)Themostappropriatepatternoffinancingisoneinwhichassetbuildupandlengthoffinancingtermareperfectlymatched.(1-b)AlternativePlanByusinglong-termcapitaltocoverpartofshort-termneeds(figure6-6),thefirmvirtuallyassuresitselfofadequatecapitalatalltimes.Figure6-6usinglong-termfinancingforpartofshort-termneeds(1-c)AlternativeplanUsingshort-termfinancingforlong-termneedsSomesmallfirmsdon’thaveaccesstothecapitalmarketstogetlargeamountsoflong-termcapitalThisstrategy(figure6-7)isgenerallymorerisky.Figure6-7usingshort-termfinancingforpartoflong-termneedsSummaryofthreepatternsoffinancingAssetbuildupandfinancingtermperfectlymatchedusinglong-termfinancingforpartofshort-termneedsusingshort-termfinancingforpartoflong-termneeds(1)Patternsoffinancing:ThreescenariosUnderstandingonShort-Termvs.Long-TermFinancing•Short-termfinancingislessexpensivebutriskier•Long-termfinancingismoreexpensivebutlessrisky(orsafer)•Firmmustdecidetheappropriate“mix”.Q:Whatis“appropriatemix”?Afirmshouldattempttorelateassetliquiditytofinancingpatterns,andviceversa.(2)OptimalFinancingPlansRisk-orientedfirmConservativefirmAnaggressive(risky)firm:S/TfinancingandlowliquidityAconservative(safeorcautious)firm:L/TfinancingandhighliquidityAmoderate(balanced)firm:S/TfinancingandhighliquidityORL/TfinancingandlowliquidityAppropriatestrategyisdeterminedbasedoncompany’stoleranceforrisk!!•ConsidertwoplansforfinancingEdwardsCorporation.Totalneedsare$600,000.•PlanA$500,000ofshort-termfinancing$100,000oflong-termfinancing.•PlanB$150,000short-termfinancing$450,000long-termfinancing•PlanAislessexpensive,sinceshort-termfinancingcosts6%vs10%forlong-term.ACaseofDecisionProcessPPT6-11ImpactofFinancingPlansonEarningsVaryingConditionanditsImpact•Tightmoneyperiods–Capitalisscarcemakingshort-termfinancingdifficulttofindormayensueveryhighrates–Inadequatefinancingmaymeanlossofsalesorfinancialembarrassment•Expectedvalue–RepresentsthesumoftheexpectedoutcomesunderbothconditionsExpectedReturnsunderDifferentEconomicConditions(1)theOperatingCycleandtheCashCycle•OperatingCycle–Thedaysthatafirmshouldtakefromthetimethefirmacquiressomeinventorytothetimeitcolle