Chapter 18 - Chapter 18 ASSET MANAGEMENT: THE INVESTMENT...

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Chapter 11: Strategic Leadership Chapter 18 © Oxford University Press Southern Africa, 2008. All rights reserved. ASSET MANAGEMENT: THE INVESTMENT DECISION
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Chapter 11: Strategic Leadership CHAPTER CONTENT Opening case: ABC limited Introduction The management of current assets The cost and risk of investing in current assets The management of cash and marketable securities The management of debtors The management of stock Long-term investment decisions and capital budgeting The nature of capital investments The evaluation of investment projects © Oxford University Press Southern Africa, 2008. All rights reserved.
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Chapter 11: Strategic Leadership COSTS AND RISKS OF INVESTING IN CURRENT ASSETS Current assets are a necessary and significant component of the total assets of the business. Consideration should be given to the consequences of having too much or too little invested in current assets. Two factors play a role – risk and cost. Consider the implication of: Over-investment in current assets Under-investment in current assets
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Chapter 11: Strategic Leadership MANAGEMENT OF CASH AND MARKETABLE SECURITIES The costs of holding cash are Loss of interest Loss of purchasing power The costs of little or no cash are Loss of goodwill Loss of opportunities Inability to claim discounts Cost of borrowing
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Chapter 11: Strategic Leadership MARKETABLE SECURITIES Marketable securities are investment instruments on which a business earns a fixed interest income. There are three reasons to have a certain amount of cash available: The transaction motive The precautionary motive The speculative motive
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Chapter 11: Strategic Leadership THE CASH BUDGET Determining the cash needs of a business is crucially important. The cash budget is a detailed plan of future
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This note was uploaded on 03/22/2011 for the course MNB 101D taught by Professor Unknown during the Spring '09 term at University of South Africa.

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Chapter 18 - Chapter 18 ASSET MANAGEMENT: THE INVESTMENT...

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