enumeration

• Modes of Payment

  • Cash basis – provides ready availability of cash; mainly used in small retail goods.
  • Credit cards – offers a relatively longer time for cash availability than cash basis. It is mainly used in big retail & service establishments.
  • Checks – cash availability after “float period (mail float, processing float & clearing float). It is mainly used in whole sale & high value consumer goods.
• Cash Management Strategies

  • Managing Collections
  • Controlling Disbursement
  • Synchronize inflows and outflows
  • Safety Stock
• Cash Flow Management:

  • Preparation of cash budget
  • Optimizing Cash Balances
• Models of Optimizing Cash Balance

  • BAUMOL MODEL
  • Control Limit Model
• Management of Current Assets

  • Cash Management
  • Marketable Securities Management
  • Receivables Management
  • Inventory Management
• Factors to consider in investing in MS

  • Liquidity
  • Investment Risk
  • Profitability
  • Term
• Types of Investment Risk

  • Default Risk
  • Settlement Risk
  • Interest Rate Risk
• Levels of Credit Policy

  • Policy Level – relates to customers – credit and collection policies.
  • Administration Level
• Elements of Credit Policy

  1. Credit Standards
  2. Credit Terms
  3. Collection Programs
• Identify

  A) Character

  B) Capacity

  C) Capital

  D) Collateral

  E) Conditions

  
• Credit Terms

  • Period
  • Discounts
• Delinquency and default – whatever credit policy a firm may adopt, there will be some customers who might delay.
• Ways of Accelerating Collection of Receivables

  1. Shorten credit terms.
  2. Offer special discounts
  3. Minimize collection float.
• Tools in Analyzing Receivables

  1. Ratio of receivables to net credit sales
  2. Receivable turnover
  3. Average collection period (Age of A/R)
  4. Aging of Accounts
• Advantages of Using JIT System

  • Inventory cost savings
  • Release of facilities
• Identify

  A) Fixed Order Quantity System

  B) Fixed Reorder Cycle System

  C) ABC System