Managing Cash FlowAn Operational Focus phần 1 pdf

[...]... that maximize cash inflow and minimize cash outflow Although the primary focus of ongoing cash management and continual operational analysis is on the manner in which cash is used by the organization, considering the sources and uses of cash and the policies and procedures used to deal with over- and undercash conditions, there are other operational areas—due to their direct impact on cash flow—that... was in Franklin’s time CASH IS THE FUEL THAT POWERS THE COMPANY CHAPTER 1 Understanding Cash Management MANAGING THE COMPANY MEANS MANAGING ITS CASH FLOW W e will be discussing the crucial subject of managing cash flow, the lifeblood of the organization—a vital element in the success and continuity of the business The emphasis of the materials is on the principal components of cash management—what company... calculates a cash flow statement to measure sources and uses of actual cash Because of timing differences, profits and cash flow move differently Good cash flow with inadequate profits means short-term survival but long-term problems Good profits without adequate cash flow means immediate trouble Even if the company generates a profit, it must be concerned with managing its cash and Cash Flow Basics 13 minimizing... Exhibit 1. 1 Flow of Funds in a Business MANAGING CASH FLOW IS A MANAGEABLE ACTIVITY Cash Flow Process Any business—manufacturing, service, financial, not-for-profit, government, and so on—begins with an infusion of cash The fundamental operating cash flow process within the business then operates in a continuous loop of short-term asset transformation as shown in the Cash Generation Cycle” in Exhibit 1. 2... million and resulted in over $2.3 million in operating profit (15 percent of sales) as shown below: Prior Year Current Year Next Year (projected) $ 12 ,002 $ 15 ,073 $ 20,292 8,436 10 ,290 13 ,877 Operating profit 2,474 $ 1, 092 2,480 $ 2,303 2,875 $ 3,540 % of Sales 9 .1% 15 .3% 17 .4% ($$ in 000s) Sales Cost of goods sold Other expenses... $92,000 cash deficit by the end of the current year Jack had assumed that a profitable and growing operation would automatically provide for enough cash 20 Understanding Cash Management Had Jack understood cash management, he would have carefully studied his cash flow situation, which, in fact, looked like this: Beginning cash in bank Collections Addition to long-term debt $ 208,000) 13 ,11 0,000) 500,000)... percent in the 19 50s, to around an average of 4 percent in the 19 60s, 4 percent to 10 percent in the 19 70s, all the way up to nearly 20 percent in the 19 80s, back down to about 3 percent through the early 19 90s fluctuating in the mid single digits through the balance of the 19 90s, and back in the early twenty-first century to the low single digits of the 19 50s The lofty interest rates of the late 19 70s and... company and each cash manager individually HOW MUCH CASH IS ENOUGH? HOW MUCH IS TOO MUCH? Objectives of Cash Management Cash management focuses on making the asset transformation process of the business work smoothly To accomplish this, the company needs to be aware of the objectives of cash management: • • • • • • • • • • Control and track cash flows Optimize sources and uses of cash Maximize revenues... at a minimum Effective cash management is necessary due to a lack of synchronization between incoming and outgoing cash flows, a lack of reliable forecastability of cash inflow amounts and timing, and costs of holding cash balances or borrowing to cover cash shortfalls What the cash management system should be designed to do is shorten the cash generation cycle by effectively managing the assets, liabilities,... into cash Inadequate cash is often the principal limiting factor in the growth of the business, and the company’s goal should be to accelerate the cash conversion process as much as possible Effective cash management maximizes cash generation for the business This means, in effect, generating positive cash flow by applying effective techniques for collecting cash due to the company, expending no more cash . dc 21 2002 012 147 Printed in the United States of America. 10 9876543 21 Contents About the Authors v Acknowledgments viii Introduction 1 Chapter 1: Understanding Cash Management 9 Cash Flow Basics 12 History,. 19 40– Managing cash flow / by Rob Reider, Peter B. Heyler. p. cm. ISBN 0–4 71 22809–5 (acid free) 1. Cash management. I. Heyler, Peter B. II. Title. HG4028.C45 R453 2003 658 .15 '244 – dc 21 2002 012 147 Printed. Excess Cash 239 Financing Sources for the Business 250 Borrowing for Cash Shortfalls 2 51 Conclusion 262 Chapter 8: Planning Cash Flow 263 Cash Flow Planning 263 Managing Cash Balances 276 Cash