RW5eim18 - CHAPTER 18 SHORT-TERM FINANCE AND PLANNING...

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CHAPTER 18 SHORT-TERM FINANCE AND PLANNING SLIDES S18.1: Key Concepts and Skills S18.2: Chapter Outline S18.3: Sources and Uses of Cash S18.4: The Operating Cycle and the Cash Cycle (3 pages) S18.7: Example (3 pages) S18.10: Short-Term Financial Policy S18.11: Carrying vs. Shortage Costs (3 pages) S18.14: Temporary vs. Permanent Assets S18.15: Total Asset Requirement Over Time S18.16: Choosing the Best Policy (2 pages) S18.18: A Compromise Financing Policy S18.19: The Cash Budget and Example (6 pages) S18.25: Short-Term Borrowing S18.26: Example: Compensating Balance S18.27: Example: Factoring S18.28: Quick Quiz S18.29: Summary CHAPTER ORGANIZATION S18.1: Key Concepts and Skills S18.2: Chapter Outline 18.1 TRACING CASH AND NET WORKING CAPITAL 18.2 THE OPERATING CYCLE AND THE CASH CYCLE Defining the Operating and Cash Cycles The Operating Cycle and the Firm’s Organizational Chart Calculating the Operating and Cash Cycles Interpreting the Cash Cycle 18.3 SOME ASPECTS OF SHORT-TERM FINANCIAL POLICY The Size of the Firm’s Investment in Current Assets Alternative Financing Policies for Current Assets Which Financing Policy is Best? Current Assets and Liabilities in Practice 18.4 THE CASH BUDGET 175
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Sales and Cash Collections Cash Outflows The Cash Balance 18.5 A SHORT-TERM FINANCIAL PLAN Short-Term Planning and Risk 18.6 SHORT-TERM BORROWING Operating Loans Letters of Credit Secured Loans Other Sources 18.7 SUMMARY AND CONCLUSIONS ANNOTATED CHAPTER OUTLINE 18.1 TRACING CASH AND NET WORKING CAPITAL Perepectives: For some reason, many students (and some faculty!) view short-term finance generally, and working capital management specifically, as less intrinsically "sexy" or important than, say, capital budgeting or the risk-return relationship. (If you doubt this, compare the number of articles dealing with working capital management to the number dealing with the CAPM published in the academic finance journals in the last two decades!) Regardless of the reason, some instructors will find it useful to emphasize the importance of short-term finance in introducing the current chapter. First of all, discussions with CFOs quickly lead to the conclusion that, as important as capital budgeting and capital structure decisions are, they are made less frequently, while the day-to-day complexities involving the management of working capital (especially cash and inventory) consume tremendous amounts of management time. Second, it is clear that while poor long-term investment and financing decisions will adversely impact firm value, poor short-term financial decisions will impair the firm's ability to remain operating . Finally, one might take a more abstract view and point out that virtually everything in Finance ultimately comes down to the measurement of cash flows and the timing thereof; short-term finance simply details the nuts-and-bolts of, and solutions to, the "nonsynchronicity" problem. Defining Cash in Terms of Other Elements
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RW5eim18 - CHAPTER 18 SHORT-TERM FINANCE AND PLANNING...

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