Current Asset Management
The Primary Objective of Cash Management
What is Maximizing Shareholders Wealth?
Changing collection period can effect this financial statement.
What is the income statement?
Best way to prevent stock-outs
What is having safety-stock?
A Reason customers want to pay their debts faster
What is a Discount on Money Owed?
The Average Collection Period?
What is Accounts Receivable/Average daily credit sales?
Guarantees Short Term Debts are Paid
What is Minimum Cash Balance?
When comparing the new plan and old plan, decreasing AR or increasing AR makes more sense
What is Decreasing AR?
Used to get the best order size
What is the Economic Order Quantity formula?
Quickest way to lower Accounts Receivables
What is selling Receivables to Collection Agencies?
The Average Inventory Level
What is EOQ/2?
The Main Reasons for Collecting Cash Early
What is to Invest or Pay off Debt?
Used in a business to determine whether to change AR policy
What is cost benefit analysis?
Product costs, carrying costs, and ordering costs
What are the costs of inventory?
Consider income that can be made, new policy cost, and whether there is a net positive effect
What are the effects of changing AR?
Ordering Costs
What is the# of orders * cost per order?
By doing this companies could save money on debt and be able to increase income by investing
What is Lower Collection Time?
Used to calculate a return on your investment
What is the rate of return?
Stock shortages. customer loss, cash loss, and revenue loss are all examples.
What are the risks of inventory mismanagement?
The Benefit of Collecting Accounts Receivable Quicker
What is Collecting at Least two Days worth of Accounts Receivables in one Day?
The Economic Order Quantity
What is Square Root of 2SO/C?
Risky but Increased Returns for a Company
What is Lower Minimum Cash Balance?
Using an investment to forego an internal project made by the company
What is the opportunity cost of capital?
Knowing where your inventory is at any given time and how much of it you have in order to manage inventory levels correctly
What is proper inventory management?
Can reduce costs of ordering and storing inventory, freeing up cash for other purposes
What is ordering correct amounts of inventory?
The Total Ordering Costs
What is TC=(SO/Q)+(CQ/2)?