B A 323 Lecture Notes - Lecture 4: Accounts Payable, Accounts Receivable, Revolving Credit

• School: SDSU
• Department: Business Administration
• Course: B A 323
• Professor: S.Kolman

Document Summary

Key concepts: the operating and cash cycles and understand why they are important, the different types of short-term financial policy, the essentials of short-term financial planning. Operating cycle equations: operating cycle = inventory period + ar period, inventory period = 365/inventory turnover, inventory turnover = cogs/average inventory, ar period = 365/receivables turnover, ar period = average collection period, ar turnover = credit sales/average ar. Cash cycle equations: cash cycle = operating cycle ap period, ap period = 365/payables turnover, payables turnover = cogs/average ap. Corporate management & short-term financial planning: cash manager deals w/collection, concentration, disbursement; short-term investments; short-term borrowing; banking relations, credit manager deals w/monitoring and control of accounts receivable; credit policy decisions. 3: stock-out costs the cost of lost sales due to lack of inventory, including lost customers. Flexible financial policy: advantages, no difficulty meeting short-term obligations, cash available for emergencies, lower shortage costs, disadvantages, liquid securities = lower return, financing short-term assets with long-term debt risky.