Business exam two notes finance

Business exam two notes finance - Business Exam Two Notes...

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Business Exam Two Notes Finance - Managing Current Assets The chief goal of financial managers who focus on current assets and liabilities is to maximize the return to the business on cash, temporary investments of idle cash, accounts receivable, and inventory - Managing Cash Transaction balances is cash kept on hand by a firm to pay normal daily expenses, such as employee wages and bills for supplies and utilities To accelerate the collection of payments from customers, some companies have customers send their payments to a lockbox, which is simply an address for receiving payments, instead of directly to the company’s main address Large firms with many offices spread out use electronic funds transfer to speed up collections - Investing Idle Cash Marketable securities are temporary investments of extra cash by organizations Commercial Certificates of Deposit are certificates of deposit issued by commercial banks and brokerage companies, available in minimum amounts of $100,000, which may be traded prior to maturity; should a cash shortage occur the organization can simply sell the CD on the open market and obtain needed funds
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Commercial Paper is a written promise from one company to another to pay a specific amount of money and one of the most popular short term investments for large business organizations Commercial paper is backed only by the name and reputation of the issuing company, so sales of commercial paper are restricted to only the largest and most financially stable companies Commercial paper is bought and sold very quickly - Maximizing Accounts Receivable Accounts receivable is money owed to a business by credit customers To encourage fast payment some businesses offer customers discounts if they pay within a certain time period On the other hand lay payment charges of between one and one and a half percent serve to discourage slow payers from sitting on their bills forever - Optimizing Inventory a company’s objective is to minimize the firm’s investment in inventory without experiencing production cutbacks as a result of critical materials shortfalls or lost sales due to insufficient finished goods inventories - Managing Current Liabilities Accounts Payable Money at organization owes to suppliers for goods and services The most widely used source of short term financing, and therefore the most important account payable is trade credit which is credit extended by suppliers for the purchase of their goods and services
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Bank Loans A line of credit is an arrangement by which a bank agrees to lend a specified amount of money to the organization upon request Banks also make secured loans which are loans backed by collateral that the bank can claim if the borrowers do not repay the loans Unsecured loans which are loans backed only by the borrowers good reputation and previous credit rating The prime rate is the interest rate commercial banks charge their best customers for short term loans
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This note was uploaded on 11/15/2007 for the course BCOR 1010 taught by Professor Latier,jef during the Fall '07 term at Colorado.

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Business exam two notes finance - Business Exam Two Notes...

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