Financial Liquidity Management

1. Financial Liquidity Management

2. Financial Liquidity Management • E-mail: GRZEGORZ.MICHALSKI@UE.WROC.PL • www: HTTP://MICHALSKIG.UE.WROC.PL/ • Mobile: 0503452860 • 5 meetings + 1 exam (test) • Next meeting: 9th April [EXAM] • G. Michalski, Effectiveness of investments in operating Cash, Journal of Corporate Treasury Management, ISSN: 1753-2574, vol. 3, iss. 1, December 2009, p. 43-54. • G. Michalski, Inventory Management Optimization as Part of Operational Risk Management,Journal of Economic Computation and Economic Cybernetics Studies and Research , ISSN: 0424-267X, vol. 43 nr 4/2009, p. 213-223.http://ssrn.com/abstract=1562699 • G. Michalski, Operational risk in current assets investment decisions: Portfolio management approach in accounts receivable, Agricultural Economics , 54/2008(1), ISSN: 0139-570X, 2008, s.12-19.http://ssrn.com/abstract=1562672

3. Example 5: D/(D+E) = 40%. Alternative Net Working Capital management policies/strategies: • Aggressive-Restrictive (A-R) with Cost of Equity rate = 42%, cost of long-term Debt rate = 18%, cost of short-term Debt rate = 14%, share of long-term debt in total debt = 30%, fixed assets = 2000, EBIT = 60% of CR, CR = 10000, current assets = 25% of CR, Accounts Payable = 40% of current assets. • Aggressive-Flexible (A-F) with Cost of Equity rate = 36%, cost of long-term Debt rate = 16%, cost of short-term Debt rate = 12%, share of long-term debt in total debt = 30%, fixed assets = 4000, EBIT = 50% of CR, CR = 20000, current assets = 45% of CR, Accounts Payable = 45% of current assets. • Conservative-Restrictive (C-R) with Cost of Equity rate = 31%, cost of long-term Debt rate = 14%, cost of short-term Debt rate = 10%, share of long-term debt in total debt = 90%, fixed assets = 2000, EBIT = 60% of CR, CR = 10000, current assets = 25% of CR, Accounts Payable = 50% of current assets. • Conservative-Flexible (C-F) with Cost of Equity rate = 26%, cost of long-term Debt rate = 12%, cost of short-term Debt rate = 8%, share of long-term debt in total debt = 90%, fixed assets = 4000, EBIT = 50% of CR, CR = 20000, current assets = 45% of CR, Accounts Payable = 55% of current assets.

5. Exam-like: Example 5b*: D/(D+E) = 44%. Alternative Net Working Capital management policies/strategies: • Aggressive-Restrictive (A-R) with Cost of Equity rate = 44%, cost of long-term Debt rate = 19%, cost of short-term Debt rate = 15%, share of long-term debt in total debt = 32%, fixed assets = 3000, EBIT = 80% of CR, CR = 8000, current assets = 30% of CR, Accounts Payable = 30% of current assets. • Aggressive-Flexible (A-F) with Cost of Equity rate = 40%, cost of long-term Debt rate = 17%, cost of short-term Debt rate = 13%, share of long-term debt in total debt = 32%, fixed assets = 6500, EBIT = 60% of CR, CR = 19000, current assets = 60% of CR, Accounts Payable = 44% of current assets. • Conservative-Restrictive (C-R) with Cost of Equity rate = 36%, cost of long-term Debt rate = 15%, cost of short-term Debt rate = 11%, share of long-term debt in total debt = 95%, fixed assets = 3000, EBIT = 80% of CR, CR = 8000, current assets = 30% of CR, Accounts Payable = 51% of current assets. • Conservative-Flexible (C-F) with Cost of Equity rate = 29%, cost of long-term Debt rate = 13%, cost of short-term Debt rate = 9%, share of long-term debt in total debt = 95%, fixed assets = 6500, EBIT = 60% of CR, CR = 19000, current assets = 60% of CR, Accounts Payable = 65% of current assets.

7. Email EXAM • If you prefer, it is possible to pass FaFi exam via email, for maximum grade (no more than): 3.5 (PLUS DST) • If you want to do that, preapare all case studies from our lectures for reality of your home country (or country you want to live in future) and send me via email before 8th APRIL 2010. After that date is possible maximum grade (no more than): 3.0 (DST), but you should deliver you email before 15th APRIL 2010. • If you want more than 3.5 or 3.0 it is possible only by traditional test.