Chapter_15_Class_Notes - Chapter15WorkingCapitalManagement...

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Chapter 15    Working Capital Management I. Cash A. Why do firms hold cash? 1. Transaction Motive – day to day cash transactions 2. Precautionary Motive – in case of less predictable CF’s 3. Speculative Motive – take advantage of bargain purchases 4. Compensating Balances – compensating bank for services B. Float – difference between balance in firm’s checkbook and balance        according to bank’s records. 1. Disbursement Float 2. Collection Float Mail Float Processing Float Availability Float II. Accounts Receivable A. Credit Policy The demand for a firm’s products or services are primarily  determined by prices, product quality, advertising and the firm’s  credit policy. Credit Policy consist of: 1. Credit Period:   the length of time customers are given  to pay for their purchases. 2 2.  Discounts:
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This note was uploaded on 01/11/2011 for the course BUS 320 taught by Professor Sloan during the Winter '08 term at N.C. State.

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Chapter_15_Class_Notes - Chapter15WorkingCapitalManagement...

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