WORKING CAPITAL

&
CASH
MANAGEMENT
Presented By:
Napire,Anna Faujia
Obal,Jaysoan
Kouassi
SANCHEZ ENGINE
LOUIS MOTORS
 CURRENT ASSETS:
320,000
CURRENT LIABILITIES:
200,000

120,000 WORKING
CAPITAL
 CURRENT LIABILITIES:
LOUIS MOTORS 400,000

CURRENT ASSETS:
360,000
-40,000WORKING
CAPITAL
 RAISE MORE CAPITAL THRU LONG TERM
DEBTS LIKE BOND

SELL AN ASSET
SANCHEZ ENGINE LOUIS MOTORS

CHOOSE SANCHEZ ENGINE AS

AN INVESTMENT
WORKING CAPITAL HELPS
INVESTORS JUDGE
SANCHEZ ENGINECURRENT LIABILITIES:
200,000

CURRENT ASSETS:
320,000
LEARNING OBJECTIVES
1. To identify what is Working Capital & its
importance

2. To determine what is Cash management &

its functions

3. To determine the relationship of working

capital and & cash management

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INTRODUCTI
ON
 “
Beware of little expenses.
A small leak will sink a
great ship.”

-Benjamin Franklin

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 WORKING CAPITAL
• A measure of both a company's efficiency and
its short-term financial health
• Gives investors an idea of the company’s
underlying operational activities

WORKING CAPITAL RATIO

Indicates whether a company has enough short term assets to cover its
short term debt.

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 WORKING CAPITAL POLICIES
o Refers to the level of investment in current assets for
targeting their targeted sales
o policies can be further framed for each component of
net working capital i.e. cash, accounts receivable, inventory
and accounts payable.
o Working Capital Management has two main decisions at two
consecutive stages
1. The level of current assets
2. Means of financing current assets

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 WORKING CAPITAL POLICIES
Restricted Policy Relaxed Policy Moderate Policy
• the estimation of ▪ the estimation of current ▪ policy assumes risk
current assets for assets for achieving the which is lower than
achieving targeted targeted revenue is restricted and higher
revenue is done very prepared after careful than conservative.
aggressively without consideration of uncertain ▪ has reasonable
considering for any events such as seasonal assurance of smooth
contingencies and fluctuations, a sudden operation of
provisions for any change in the level of working operating
unforeseen event. activities or sales etc. capital cycle with
• Also called as ▪ assume an advantage of moderate
aggressive working almost no risk or low risk. profitability.
capital policy ▪ also called as conservative
working capital policy.
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COMPUTATI
ON

Significance:

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17
 ▪ INESTING, COLLECTING, MANAGEMENT

▪ MONEY THAT COMPANYS TAKES IN AND

TAKES OUT

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 CASH MANAGEMENT
 is the corporate process of collecting and managing cash, as well as using
it for (short-term) investing
 A key component of ensuring a company’s financial stability &
solvency.
 A successful cash management involves not only avoiding insolvency,
but also reducing the length of account receivables (AR)

Function of Cash Management

Responsible for achieving optimal efficiency in two key areas:
receivables which is cash is coming in,
and payables which is cash is going out.

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 Want big impact?
Use big image.

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 Types of Cash Management
Receivables Management
▪ A cash earned but yet to be
received.
▪ A type of record that companies
use to maintain in order to keep
track on money they owe to
their clients whom they have
been served in terms of
invoices.
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Payables Management
▪ refers to the set of policies,
procedures, and practices
employed by a company with
respect to managing its trade credit
purchases.
▪ consist of seeking trade credit
lines, acquiring favorable terms of
purchase, and managing the flow
and timing of purchases so as to
efficiently control the company’s
working capital.
 RISK & RETURN
TRADE OFF
invested money can render higher
profits only if the investor is willing to
accept the possibility of losses.

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 Want big impact?
Use big image.

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 Reasons for maintaining cash on
hand

can be used or currency

or currency
To
To meet
meet immediately equivalents
equivalents
financial
financial to perform that can
that can be
be
obligations\
obligations\ economic accessed
accessed
actions immediately
immediately

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 CASH EQUIVALENTS
▪ Also known as cash and equivalents
▪ Are investments securities that are for short-term investing, and
they have high credit quality and are highly liquid.
▪ also serve as one of the most important health indicators of a
company’s financial system.

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Types of Cash Equivalents
1. Treasury bills
2. Commercial paper
3. Marketable securities
4. Money market funds
5. Short term government bonds

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 CASH FLOW
▪ Determines the quality of the company’s income
▪ Net amount net amount of cash and
cash-equivalents moving into and out of a
business.
▪ (+) indicates that a company's liquid assets are
increasing,
▪ (-) cash flow indicates that a company's liquid
assets are decreasing.
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 CASH FLOW STATEMENT
Often called as “statement of cash flows”
Indicates whether a company's income is languishing in the
form of IOUs –
Free cash flow is defined as a company’s operating cash flow
minus capital expenditures

Categories of cash flow:

▪ Operating cash flow
▪ Investing cash flow
▪ Financing cash flow

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3 ELEMENTS OF CASH FLOW
ANALYSIS INCLUDE:
▪ Accounts receivable: What customers and clients owe
you.
▪ Accounts payable: What you owe your suppliers.
▪ Shortfalls
 

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 CASH DISBURSEMENT
Also called as cash payments.
Refers to payments made by a company during a
specified period, such as quarter or year.

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THANK YOU
