Beruflich Dokumente
Kultur Dokumente
26-2
Current
Liabilities
Current Assets
Net
Working
Long-Term
Capital Debt
Other
Net Working Current
= Cash + Current –
Capital Liabilities
Assets
Time
Accounts payable period
Cash cycle
26-7
Accounts
Cash cycle = Operating cycle – payable
period
26-11
There are two elements of the policy that a firm
adopts for short-term finance.
◦ The size of the firm’s investment in current assets, usually
measured relative to the firm’s level of total operating
revenues.
Flexible
Restrictive
◦ Alternative financing policies for current assets, usually
measured as the proportion of short-term debt to long-term
debt.
Flexible
Restrictive
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26-12
A flexible short-term finance policy would maintain a
high ratio of current assets to sales.
◦ Keeping large cash balances and investments in marketable
securities
◦ Large investments in inventory
◦ Liberal credit terms
A restrictive short-term finance policy would
maintain a low ratio of current assets to sales.
◦ Keeping low cash balances, no investment in marketable
securities
◦ Making small investments in inventory
◦ Allowing no credit sales (thus no accounts receivable)
Shortage costs
CA* Investment in
Current Assets ($)
Carrying costs
Minimum
point
Total costs of holding
current assets.
Shortage costs
CA* Investment in
Current Assets ($)
Carrying costs
Shortage
costs
CA* Investment in
Current Assets ($)
Q1 Q2 Q3 Q4
Payment of accounts 275 313 362 338
Wages, taxes and other expenses 150 180 195 240
Capital expenditures 200
Interest and dividend payments 50 50 50 50
Total cash disbursements 475 743 607 628