BUS 1 Lecture Notes - Lecture 2: United States Treasury Security, Accounts Payable, Trade Credit
Document Summary
Marketable securities - short term investments easily converted into cash (3) popular marketable securities: Fm tries to shorten time between purchase of inventory/services and collection of cash from sales. Accounts receivable - sales which firm hasn"t been paid. Fm goal is to collect money owed as quickly as possible while offering customers credit terms attractive enough to increase sales. Cost of inventory not only its purchase price, but also ordering, handling, interest, and insurance costs. Capital expenditures - physical assets (land, building, machinery, equipment) (e. g. printer) Firm"s main reason for capital expenditures: expand, replace/renew fixed assets, and develop new products. Capital budgeting - analyze long term projects and select those that offer best returns while maximizing firm"s value. Firm borrows money (debt), sell ownership shares (equity), and retain earnings (profits) Borrowed funds can be separated into short and long term loans: short term - due within a year.
