Chapter 19 Short-Term Financial Planning 0
0 Chapter 19 Short-Term Financial Planning
Chapter Outline Tracing Cash and Net Working Capital The Operating Cycle and the Cash Cycle Some Aspects of Short-Term Financial Policy ■The Cash Budget Short-Term Borrowing A Short-Term Financial Plan
1 Chapter Outline n Tracing Cash and Net Working Capital n The Operating Cycle and the Cash Cycle n Some Aspects of Short-Term Financial Policy n The Cash Budget n Short-Term Borrowing n A Short-Term Financial Plan
Key Concepts and Skills Be able to compute the operating and cash cycles and understand why they are important Understand the different types of short-term financial policy Understand the essentials of short-term financial planning 2
2 Key Concepts and Skills n Be able to compute the operating and cash cycles and understand why they are important n Understand the different types of short-term financial policy n Understand the essentials of short-term financial planning
Sources and Uses of Cash Sources of Cash Uses of Cash Obtaining financing: Paying creditors or Increase in long-term stockholders debt Decrease in long-term Increase in equity debt Increase in current ■Decrease in equity liabilities Decrease in current Selling assets liabilities Decrease in current o Buying assets assets ■Increase in current ■ Decrease in fixed assets assets Increase in fixed assets
3 Sources and Uses of Cash n Sources of Cash q Obtaining financing: n Increase in long-term debt n Increase in equity n Increase in current liabilities q Selling assets n Decrease in current assets n Decrease in fixed assets n Uses of Cash q Paying creditors or stockholders n Decrease in long-term debt n Decrease in equity n Decrease in current liabilities q Buying assets n Increase in current assets n Increase in fixed assets
The Operating Cycle The time it takes to receive inventory,sell it, and collect on the receivables generated from the sale of the inventory Operating cycle inventory period accounts receivable period Inventory period time inventory sits on the shelf Accounts receivable period time it takes to collect on receivables
4 The Operating Cycle n The time it takes to receive inventory, sell it, and collect on the receivables generated from the sale of the inventory n Operating cycle = inventory period + accounts receivable period q Inventory period = time inventory sits on the shelf q Accounts receivable period = time it takes to collect on receivables