TREASURY MANAGEMENT

• Credit agreements


  terms of sale defines the amount of any credit
• Credit Agreements


  open account involve i on implicit contract
• Credit Agreement


  promissory note
• Commercial draft


  seller prepares a draft ordering payment

  by the customer and send this draft to customers bank.
• Sight/time Draft 


  *immediate payment is required

  *like a postdated check

  *once accepted is called trade acceptance
• Bankers acceptance


  bank guaranteees the customers debt
• Financial ratios


  the relationships between financial statement items

  or accounts expressed in mathematical fashion.
• Credit Analysis


  procedures to determine the likehood a customer

  will pay it bills.
• Standard Ratios are based on

  *company budget for the same period

  *those used by the industry to which the firm belongs

  *those used by the firms successful competitors

  *those used by the firms using prior periods

  *those used by the analyst in the past
• Analysis covers the company status in terms of: 


  • liquidity

  • asset utilization

  • debt utilization

  • profitability
• Computation of ratios could be presented as:

  – percentage

  – fraction

  – peso amount

  – relative ratio
• Financial Ratio Analysis


  relationships between financial statements item or

  accounts expressed in mathematical fashion
• liquidity ratio


  firms ability to pay immediate and incoming

  cash disbursement
• debt utilization


  estimates the overall debts statues of the

  firm in high of its assets base and earning power.
• assets utilization


  measures how often is the turn over of

  accounts receivables. Inventory and long-terms assets
• profitability


  measures the firms capacity to earn

  sufficient return on sales total assets and owners

  investments
• Numerical Credit scoring 5’C of credit

  1.Character

  2. Capacity to pay

  3. Capital

  4. Collateral

  5. Condition of Business
• Credit policy


  standards set to determine the amount and nature of credit to extend to customers.
• Collection policy


  procedure to collect and monitor receivables
• Bankruptcy


  the reorganizations or liquidation of a firm that cannot pay its debts.
• Workout


  agreement between a company and its creditors establishing the steps the

  company must take to avoid bankruptcy.
• Liquidation


  sales of assets
• Reorganization


  restructuring of financial claims on failing firm to allow it to keep operating
• Financial planning


  is an action or a series of actions taken with the intention of producing a comprehensive financial plan.
• Financial plan


  is a path to help you achieve your life's financial goals.
• Financial planning 


  it forces managers to think systematically about the relationship among their goals for growth, investing and financing
• Financial planning is a process consisting of

  1. Analyzing
  2. Projecting
  3. Deciding
  4. Measuring
• Firms must plan for both short term and long term
• Short -term planning rarely looks ahead further than the next 12 months
• Planning horizon


  Time horizon corresponding to a financial plan
• Strategic Planning 


  Involves capital budgeting on a grand scale.
• 3 Alternatives business plan covering the next 5 years:

  1. A best case or aggressive growth plan
  2. A normal growth plan
  3. A plan of retrenchment
• A best case or agressive growth plan


  calling for heavy capital investment and new products, rapid growth of existing markets, or entry into new markets
• A normal growth plan


  It is in which the divisions grows with its markets but not significantly at the expense of its competitors.
• A plan of retrenchment


  if the firm's market contract, this is planning for lean economic times
• Forecasting 


  it concentrates on the mostly likely future outcome
• Three requirments for Effective Planning

  1. Forecasting
  2. Choosing the Optimal Financial Plan
  3. Watching the Plan Unfold
• Forecasting


  the firm will never have perfectly accurate forecasts
• Choosing the Optimal Financial Plan


  the financial manager has to choose which plan is best.
• Watching the Plan unfold


  Financial plans are put date as soon they are complete, often they are out of date even earlier