Management and Organizational Studies 2310A/B Lecture Notes - Lecture 6: Accounts Payable, Capital Budgeting, Cash Flow

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Jun Wang

Document Summary

Operaing cycle = inventory period (product exist in irm) + accounts receivable period (sell and collect money) Cash cycle (use and collect cash) = operaing cycle accounts payable period (spend cash and payment inventory) Cash budget project cash low in short term planning (borrowing) Speculaive moive: barging purchases, atracive interest rates *advantage. Trade-of: opportunity cost of holding cash interest that you"ll earn if holding too much cash. Float delay of cash using and receiving cheque. Bank (available) minus cash account (book: disbursement spend money. Available minus book >0: collecing deposit. Float management is to reduce the collecion delay. Credit management looks at the tradeof of increased sales and costs of graning credits. Length of credit period major factor: length of buyer"s operaing cycle (shorter cycle = shorter payable period) Revenue (delay in receiving cash, increase price, increase total sale) Cost is sill incurred even cash isn"t received. Pay less than full price if they use discount.