Register now to access 7 million high quality study materials (What's Course Hero?) Course Hero is the premier provider of high quality online educational resources. With millions of study documents, online tutors, digital flashcards and free courseware, Course Hero is helping students learn more efficiently and effectively. Whether you're interested in exploring new subjects or mastering key topics for your next exam, Course Hero has the tools you need to achieve your goals.
2 Pages
Improving cash flow
Course: FIN 430, Fall 2010School: Rutgers
Rating:
Word Count: 446
Document Preview
Thekeyishavinggoodinformationds Goodcashflowforecastingisattheheartofcashflowmanagement. Improvingcashflow Thekeystotheabilityofabusinesstohandlecashflowproblemsare: Haveareliablecashflowforecastingsystem Activelymanageworkingcapital Choosetherightsourcesoffinanceforthebusinessnee andusingit!Agoodcashflowforecast: Isupdatedregularly Makessensibleassumptions Allowsforunexpectedchanges...
Unformatted Document Excerpt
Coursehero >> New Jersey >> Rutgers >> FIN 430Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.
Course Hero has millions of student submitted documents similar to the one
below including study guides, practice problems, reference materials, practice exams, textbook help and tutor support.
Thekeyishavinggoodinformationds
Goodcashflowforecastingisattheheartofcashflowmanagement. Improvingcashflow
Thekeystotheabilityofabusinesstohandlecashflowproblemsare:
Haveareliablecashflowforecastingsystem
Activelymanageworkingcapital
Choosetherightsourcesoffinanceforthebusinessnee
andusingit!Agoodcashflowforecast:
Isupdatedregularly
Makessensibleassumptions
Allowsforunexpectedchanges
Isreviewedregularlybyseniormanagement
Workingcapitalmanagementfocuseson:
Strikingtherightbalancebetweenofferingcustomerscreditandensuringthattheypayontime
Holdinganappropriatelevelofstocksinthebusiness
Managing relationships with suppliers so that the maximum amount of trade credit can be
obtainedwithoutdamagingsuppliestothebusiness
ManagingDebtors(creditcontrol)
Thisisnteasy.Creditcontrolcoversareassuchas
Policiesonhowmuchcredittogiveandrepaymenttermsandconditions
Measurestocontroldoubtfuldebtors(chasing,threateninglegalactionetc)
Creditchecking(onlyallowingcredittocustomerswhocanaffordtopay!
Sellingoffdebtstodebtfactors
Cashdiscountsandotherincentivesforpromptpayment
Improvedrecordkeepinge.g.accurateandtimelyinvoicing
Oneareayoushouldbeawareofis factoring.Thisinvolvesthesellingofdebtors(moneyownedtothe
it.
business)toathirdparty.Thisgeneratescashanditguaranteesthefirmapercentageofmoneyowedto The downsideto factoring isthatit reduces income andprofit margin made onsales. The costs
involvedinfactoringcanbehigh!
ManagingSuppliers(tradecredit)
Suppliersareimportantsourcesoffinanceforabusinessandkeypartofmanagingcashflow. Trade
creditreferstoamountsowedtosuppliersforgoodssuppliedoncreditandnotyetpaidfor.Delaying
paymentmeansthatthebusinessretainscashlonger.
However,bydelayingpayment,thebusinesshastobecarefulnottodamageitscreditreputationand
rating. Trade creditors are seen (wrongly) as a free source of capital. Some firms habitually delay
paymenttocreditorsinordertoenhancetheircashflowashortsightedpolicywhichalsoraisesethical
issues.
ManagingStocks(stockcontrol)
Stockreferstogoodspurchasedandawaitinguseorproducedandawaitingsale.Stockstaketheformof
rawmaterials,workinprogressandfinishedgoods.
Stockholdingiscostlyandthereforeitissoundbusinessto:
keepsmallerbalances(justintimestocks)
computeriseorderingtoimproveefficiency
improvestockcontrol
Thiswillcutdownthespendingonstockbutmayleavethebusinessvulnerabletostockout(i.e.no
stocksavailabletomeetdemandwhichisbadnews!)
Find millions of documents on Course Hero - Study Guides, Lecture Notes, Reference Materials, Practice Exams and more.
Course Hero has millions of course specific materials providing students with the best way to expand
their education.
Below is a small sample set of documents:
Below is a small sample set of documents:
Rutgers - FIN - 430
PubliclimitedcompanyWellover95%oflimitedcompaniesintheUKareprivateitisbyfarthemostcommonformoflimited company.However,youalsoneedtoknowaboutpubliclimitedcompanies.Apubliclimitedcompany('PLC')isacompanythatis abletoofferitssharestothepublic .Theydonth
Rutgers - FIN - 430
SoletradersMostbusinessesintheUKaresmallbusinesses,ownedandoperatedbyoneperson.Inmostcases, thesebusinessesoperateasasoletrader.LookthroughtheYellowPagesoralocalfreebusinesslistingpostedthroughyourletterboxandyouwill seelotsofexamplesofpeopleoperating
Rutgers - FIN - 430
TheimportanceofworkingcapitalDefinitionofworkingcapitalThenetworkingcapitalofabusinessisitscurrentassetslessitscurrentliabilitiesCurrentAssetsinclude:StocksofrawmaterialsWorkinprogressFinishedgoodsTradedebtorsPrepaymentsCashbalancesCurrentLiabil
Rutgers - FIN - 430
TheworkingcapitalcycleAsanintroductiontotheworkingcapitalcycle,hereisaquickreminderofthemaintypesofcashinflow andoutflowinatypicalbusiness:InflowsOutflowsCashsalestocustomersPurchasingfinishedgoodsforresaleReceiptsfromcustomerswhowereallowedtobuy P
Rutgers - FIN - 430
WorkingcapitalneedsDifferent industries have different optimum working capital profiles, reflecting their methods of doing businessandwhattheyareselling. Businesses with a lot of cash sales and few credit sales should have minimal trade debtors. Super
Rutgers - FIN - 435
assignment of rentsWe talked about what a rent is. Its a matter of classification. But then things getmore confusing. Focus on these three issues: (1) when does the assignmentbecome effective between the mortgagor and mortgagee? (2) When does theassig
Rutgers - FIN - 435
Environmental liability CERCLAThe Comprehensive Environmental Response, Compensation and Liability Actimposes liability for the cost of cleanup, health assessment and health effectstudies. Owners and operators can avoid liability for cleanup costs if t
Rutgers - FIN - 435
Equitable conversionThis is a very odd doctrine, and its the kind of thing that creates traps if youre notaware of the doctrine. Most people think that the risk of loss is on the seller untilyou complete the purchase: as long as youre in the contract s
Rutgers - FIN - 435
Fire insurance and eminent domain awards Starkman v. SigmondWho gets the fire insurance proceeds if both the mortgage and insurance policy aresilent? This case holds that the mortgagor gets the proceeds, assuming that thecollateral isnt impaired at the
Rutgers - FIN - 435
More on amortizationWe went over the kinds of payment arrangements you can have with amortgage. Theres one more: you dont have to amortize the mortgage over theterm of the mortgage. You can do smaller payments but then pay off the rest of thetotal as
Rutgers - FIN - 435
More on leasesLeases are pretty important in the process. How does the mortgagee preserve afavorable lease thats junior? We know how to get rid of it: join the tenant, and theforeclosure terminates the lease. If you want to keep the lease in a pick and
Rutgers - FIN - 435
More on the Recording ActsFirst in time, first in right is the rule unless you can take advantage of theRecording Acts. You can do so if the interest was created by an instrument. If youhave an instrument, its capable of being recorded. But if theres n
Rutgers - FIN - 435
NoticeHow can B get notice of As rights? There are four ways: (1) actual knowledge, (2)recorded documents, (3) persons in possession, or (4) the duty to inquire from anyof the above. The principal basis for the Recording Acts is constructive or actual
Rutgers - FIN - 435
We left off talking about part performance. We mentioned the three traditionalelements listed as part performance. But only the first one isreally performance. The part performance in Roundy v. Waner was thatthe Waners had made improvements to the prop
Rutgers - FIN - 435
More on Schrader v. BentonWraparound mortgages were very popular back in the day! The seller got a greatreturn on their investment, and the buyer got a good deal too. Only the bank gotscrewed. Amfac didnt like the deal! If they could get the money back
Rutgers - FIN - 435
Specific performanceThis is a great, powerful remedy! It allows you to hold someones feet to thefire. If the vendor sues for specific performance, it means that the vendee has tokeep prepared to purchase the property while the suit is pending. They mus
Rutgers - FIN - 435
Statute of fraudsEngland didnt have any kind of recording system until 1925. Then they had aregistry system. The idea is that you can look at title and know exactly who ownswhat. The purpose of the statute of frauds was to start a publicly maintainedr
Rutgers - FIN - 435
The balance of bargaining powerThe Restatement of Mortgages 4.1(a) sides with the lien theory states. 4.1(b)says that generally mortgages cant grant an enforceable right to possession in thefuture to the mortgagee. Why do you need both? You cant make a
Rutgers - FIN - 435
Title assuranceThe three types of deedsThe warranty deed this contains the five or six warranties that well be talkingabout. This one contains the most promises. You warrant, for example, against allencumbrances. If there is an encumbrance, the warran
Rutgers - FIN - 435
Title insuranceTitle insurance is an odd thing. Its not insurance in the typical sense. Typically, ifyou buy, for example, life insurance, the insurance company knows that it willsuffer a loss, but it just doesnt know when. Title insurance doesnt work
Rutgers - FIN - 435
Waste Prudential Insurance Company of America v. Spencers Kenosha Bowl,Inc.Here we have (presumably) a bowling alley in Kenosha. What happened? Delcowas operating the bowling alley. They borrowed money from Prudential and thenSpencers buys the propert
Rutgers - FIN - 435
When is the commission earned?There are lots of ways under the listing agreement in the book. The agent gets aconclusive presumption that he or she caused the sale! Does there have to be a salein order to have a selling price? How could there be a sell
Rutgers - FIN - 440
Chapter 1. IntroductionI. Financial Assets An asset is anything with value in a marketplaceo tangible assets are physical property examples: car, building, lando intangible assets are legal claims on something of value A financial asset is an intang
Rutgers - FIN - 440
Chapter 2. Financial Intermediaries & Financial InnovationI. Financial Institutions Provider of financial services such aso transforming financial assets in terms of maturity of liquidity (theseare financial intermediaries)o trading financial assets
Rutgers - FIN - 440
Chapter 3. Role of Government in Financial MarketsI. Why regulate? Economists often justify regulation when there is a market failureo equilibrium market outcome would not be optimalo why? asymmetric information some investors have more/better inform
Rutgers - FIN - 440
Chapter 4 Depository Institutionscommonly referred to as "banks"o bank holding co.stock in more than one banko chapters 4, 7-9 refer to financial intermediarieso transform market assets into more preferred assets, which become theirliabilityI. Asset
Rutgers - FIN - 440
Chapter 7 Insurance CompaniesI. Background insurance companies are risk bearers; in other words, they bear risk thatindividuals are willing to pay to avoid-risk of death, disability, property loss,litagation, investment fluctuation, etc. insurance co
Rutgers - FIN - 440
Chapter 8 Investment CompaniesQ. What is an investment company?A. An investment company is a vehicle of indirect investment, where investors fundsand pooled, used to purchase a portfolio of assets, and the investors own shares in theportfolio.I. Adva
Rutgers - FIN - 440
Chapter 9 Pension Funds Pension funds are defined by their tax treatment and function.o They exist for the eventual payment of retirement benefitso Qualified plans have tax exempt contributions and earnings Pension plan sponsors can be private compani
Rutgers - FIN - 440
Chapter 10 Properties and Pricing of Financial AssetsI. Properties of Financial Assets that affect value moneynesso can asset be used as a medium of exchange, or easily converted tomoney? money-yes checking account-yes Tbill-easily converted real
Rutgers - FIN - 440
Chapter 11 The Level and Structure of Interest RatesI. Level of Interest Rates-Market for Loanable Funds Demand for Loanable Fundso behavior of issuers and borrowers-r represents the cost of borrowing, sodemand curve is downward slopingwhat shifts th
Rutgers - FIN - 440
Chapter 12 The Term Structure of Interest RatesI. Yield Curve what is the relationship between yield and maturity?o complicated-sometimes the yield decreases with maturity, sometime itincreases with maturityo usually the yield rises with maturity but
Rutgers - FIN - 440
Chapter 13 Risk and Return in Asset Pricing ModelsI. Portfolio Theory investor chooses a group of assetswhat affects this decision? assume that investors are risk averseo must be compensated for taking on risk, i.e. there is a risk /returntradeoff a
Rutgers - FIN - 440
Chapter 14 Primary Markets Primary markets include all types of securities, but are distinguished by the factthat the security is being sold for the first time After a security is offered in the primary market, it becomes part of thesecondary market
Rutgers - MGMT - 325
Arbitration I. GRIEVANCE ARBITRATION IN LABOR RELATIONS A. HOW DO YOU GET THERE? ARBITRATION AGREEMENT 1. LABOR Collective Bargaining Agreement * grievance procedure * permanent umpire * ad hoc arbitrator through AAA or FMCS * Submission agreement 2. COMM
Rutgers - MGMT - 325
Best Alternative to a Negotiated Agreement I. ALTERNATIVES TO AGREEMENT or the limits of negotiation A. The BATNA, or Best Alternative to a Negotiated Agreement: The BATNA is the best outcome you can achieve without negotiating. It must be an action you c
Rutgers - MGMT - 325
Claiming ValueLAX AND SEBENIUS ON CLAIMING VALUE A. Inventory of strategies for claiming value 1. Shaping perceptions of alternatives: Representations regarding other offers, desirability of deal or some aspect of it, bluffs, willingness to walk away, wi
Rutgers - MGMT - 325
DEBRIEFING THE PEPULATOR PRICING EXERCISE: Prisoner's Dilemma: How does cooperation ever emerge in a competitive environment? A. Game theory: In a single prisoner's dilemma game, you always end up with a mediocre outcome if each party pursues selfinterest
Rutgers - MGMT - 325
EMPLOYMENT ARBITRATION: A. Defined: Generally analogous to binding arbitration of grievances in procedure, but in the absence of a labor union. Employee may be represented by private counsel, or represent self. Employer generally is represented by private
Rutgers - MGMT - 325
ETHICS IN NEGOTIATION I. Going too far in pursuit of value: Drawn from G. Shell, "When is it legal to lie in negotiations?" Sloan Mgmt. Rev. 93, 9496 (Spring 1991). COMMON LAW FRAUD defined: A statement is fraudulent when the speaker makes a knowing misre
Rutgers - MGMT - 325
GETTING PAST NO: NEGOTIATING WITH DIFFICULT PEOPLE, by William Ury (Harvard Negotiation Project) A. FiveStep Breakthrough Strategy to turn adversaries into partners: 1. Don't React: Go to the Balcony. 2. Disarm them: Step to Their Side. 3. Change the Game
Rutgers - MGMT - 325
GETTING TO YES by Fisher, Ury, and Patton of the Harvard Negotiation Project (1991) FOUR BASIC STEPS: 1. 2. 3. 4. Separate People from the Problem Focus on Interests, not Positions Invent Options for Mutual Gain Use Objective CriteriaThis results in Prin
Rutgers - MGMT - 325
Lewicki et al. On Integrative Bargaining: A. Overview: Adopting a mediator's perspective as you negotiate. 1. Create a free flow of information 2. Attempt to understand the other's real needs and objectives 3. Emphasize commonalities and minimize differen
Rutgers - MGMT - 325
MEDIATION MODELS 1. Traditional Facilitative Mediation: In non-directive or facilitative mediation, the mediator assists the parties with principled or interest-based negotiation, asks problemsolving questions designed to help the parties come up with the
Rutgers - MGMT - 325
PREPARING TO NEGOTIATE I. Preparing to Negotiate (from L.B. Bingham, Negotiating for the Public Good, a chapter in The Handbook of Public Administration (2nd Ed., 1996), edited by James Perry, published by JosseyBass, Inc. A. Identify the Subject and Scop
Rutgers - MGMT - 325
RE 611 / Fin 611 Real Estate FinanceLecture Notes Overview of Real Estate Finance1)Overview of Real Estate Financea) Real estate finance involves the institutions, markets, and instruments usedto transfer money and credit for the purpose of developin
Rutgers - FIN - 300
BusinessAngelsBusinessownersoftenreportthatcompanyfinanceof10,000to250,000canbeverydifficulttoobtain evenfromtraditionalsourcessuchasbanksandventurecapitalists.Banksgenerallyrequiresecurity and most venture capital firms are not interested in financing
Rutgers - FIN - 300
FinancingusinganoverdraftOverdraftfinancingisprovidedwhenbusinessesmakepaymentsfromtheirbusinesscurrentaccount exceeding the available cash balance. An overdraft facility enables businesses to obtain shortterm fundingalthoughintheorytheamountloanedisre
Rutgers - FIN - 300
When a company is growing rapidly, for example when contemplating investment in capitalequipment or an acquisition, its current financial resources may be inadequate. Few growingcompanies are able to finance their expansion plans from cash flow alone. T
Rutgers - FIN - 300
IntroductiontohirepurchaseandleasingIntroductionTheacquisitionofassetsparticularlyexpensivecapitalequipmentisamajorcommitmentformany businesses.Howthatacquisitionisfundedrequirescarefulplanning.Ratherthanpayfortheassetoutrightusingcash,itcanoftenmakes
Rutgers - FIN - 300
Introductiontosharecapital(equity)IntroductionWhatisequity?Equityisthetermcommonlyusedtodescribetheordinarysharecapitalofabusiness.Ordinarysharesintheequitycapitalofabusinessentitletheholderstoalldistributedprofitsafterthe holdersofdebenturesandprefe
Rutgers - FIN - 300
NewshareissuesviapublicflotationsIntroductionTherearethreemainwaysofraisingequityfinance:Retainingprofitsinthebusiness(ratherthandistributingthemtoequityshareholders);Sellingnewsharestoexistingshareholders(a"rightsissue")Sellingnewsharestothegeneralp
Rutgers - FIN - 300
RetainedprofitsRetained profit is by some way the most important and significant source of finance for anestablishedprofitablebusiness.Theprincipleissimple.Whenabusinessmakesanetprofit,theownershaveachoice:eitherextractit fromthebusinessbywayofdividen
Rutgers - FIN - 300
SharecapitalrightsissuesIntroductionWhatisarightsissue?Arightsissueisanissueofnewsharesforcashtoexistingshareholdersinproportiontotheirexisting holdings.Arightsissueis,therefore,awayofraisingnewcashfromshareholdersthisisanimportantsourceof newequity
Rutgers - FIN - 300
SourcesoffinanceforastartupbusinessIntroductionOftenthehardestpartofstartingabusinessisraisingthemoneytogetgoing.Theentrepreneurmight haveagreatideaandclearideaofhowtoturnitintoasuccessfulbusiness. However,ifsufficientfinancecantberaised,itisunlikelyt
Rutgers - FIN - 300
Venture Capital is a form of "risk capital". In other words, capital that is invested in a project (inthis case - a business) where there is a substantial element of risk relating to the future creation ofprofits and cash flows. Risk capital is invested
Rutgers - FIN - 410
AssetturnoverThisratioconsiderstherelationshipbetweenrevenuesandthetotalassetsemployedinabusiness. Abusinessinvestsinassets(machinery,inventoriesetc)inordertomakeprofitablesales,andagoodway tothinkabouttheassetturnoverratioisimaginingthebusinesstryingt
Rutgers - FIN - 410
DebtorDaysThedebtordaysratiofocusesonthetimeittakesfortradedebtorstosettletheirbills.Theratioindicates whetherdebtorsarebeingallowedexcessivecredit.Ahighfigure(morethantheindustryaverage)may suggestgeneralproblemswithdebtcollectionorthefinancialpositio
Rutgers - FIN - 410
Financialinformationisalwayspreparedtosatisfyinsomewaytheneedsofvariousinterestedparties (the"usersofaccounts").Stakeholdersinthebusiness(whethertheyareinternalorexternaltothe business)seekinformationtofindoutthreefundamentalquestions:(1)Howisthebusine
Rutgers - FIN - 410
GearingratioGearingfocusesonthecapitalstructureofthebusinessthatmeanstheproportionoffinancethatis providedbydebtrelativetothefinanceprovidedbyequity(orshareholders).Thegearingratioisalsoconcernedwithliquidity. However,itfocusesonthelongtermfinancialsta
Rutgers - FIN - 410
Liquidityrations(current&acidtest)Therearetwomainliquidityratioswhichareusedtohelpassesswhetherabusinesshassufficientcash orequivalentcurrentassetstobeabletopayitsdebtsastheyfalldue.Inotherwords,theliquidityratios focusonthesolvencyofthebusiness.Abusin