PA 546 Constantine Hadjilambrinos Managing Short-Term Resources Lecture 3 September 13, 2005 PA 546 Constantine Hadjilambrinos Working capital: Current assets – Current liabilities Current assets: Cash and highly liquid assets (money market accounts, very short term bonds, etc.)
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Current assets – Current liabilities
Current assets: Cash and highly liquid assets (money market accounts, very short term bonds, etc.)
Liquidity has a “cost”: High liquidity means that investment opportunities offering better rates of return cannot be utilized.
Processing deposits, checks, and reconciling accounts
Concentration/zero balance accounts
Daily account notification
Electronic funds transfer
Counting depositing funds
Safe deposit boxes
Storage of stocks, bonds, and cancelled checks
Lines of credit
Long-term bond underwriting
Registration of bonds
Get discounts for early payment
Avoid penalties for late payments (pay on time)
*Typical terms 2/10 N/30 (No penalty if paid in 30 days and 2% discount if paid in 10 days or less.
Consider reducing frequency of payroll
Delay in payment (when do benefits get paid?)
Interest = Loan amount X Interest rate/yr X Fraction of yr.