The Role of Cash Management in Corporate Finance

1
The Role of Cash Management in Corporate Finance

• Chapter 1

2
Strategize

• The objectives of cash management
• How cash management supports major corporate
  financial objectives
• The major functions of cash management within the
  treasury function
• The place of cash management in the corporate
  financial function
• The historical evolution of cash management in
  the United States

3
Define 1

• The the total time interval from the time
  resources are purchased at the beginning of a
  companys operating cycle until the time payment
  is received for goods or services at the end of a
  companys operating cycle.

cash flow timeline
4
Define 2

• Funds collected from customers, obtained from
  financial sources such as lenders or received
  from other payors.

cash inflows
5
Define 3

• Funds disbursed from liquid reserves to
  vendors, employees, lenders, shareholders, and
  other payees of the company.

cash outflows
6
Define 4

• The interval between the time the payor mails
  the check and the time the payee receives
  available funds in its at its financial
  institution.

collection float
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Define 5

• Funds that are systematically transferred to
  create a centralized inventory of liquid reserves
  held as cash or invested in cash equivalents.
  These funds include internal transfers among
  operating units of a company and between various
  bank accounts owned by a company.

concentration liquidity management flows
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Define 6

• This type of float results from the delay
  between the time a payor mails a check and the
  time the bank debits the payor's account.

disbursement float
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Define 7

• In early May 1998, the Council of the European
  Union finalized and of this union. The chief
  aims of the union were the introduction of the
  euro and linkage of economic policies for all
  member countries.

Economic and Monetary Union (EMU)
10
Define 8

• The time interval or delay, between the start
  and completion of a specific phase or process
  occurring along the cash flow timeline.

float
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Define 9

• The delay between the purchase of goods and
  services, and the receipt of an invoice by the
  payor.

invoicing float
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Describe 1

• Describe the four stages in a companys basic
  operating cycle.

• Acquire materials or resources
• Convert materials to goods convert resources to
  services

• Sell goods or services
• Collect payments for goods or services

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Describe 2

• Describe five major objectives of cash
  management.

• Maintaining liquidity

• Optimizing cash resources
• Financing
• 4. Managing risk
• 5. Coordinating financial functions

What is the most important objective?
14
Describe 3

• Describe the four phases of the Cash Flow
  timeline.

• Purchase of resources
• Payment for resources

• Sale of goods and services
• Collection of sales receipts

15
The Cash Register Puzzle
Investing
Borrowing
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Describe 4

• Describe three types of cash flows managers must
  consider.

• Cash inflows
• Concentration and liquidity management flows

• Cash outflows

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Describe 5

• Describe four types of float associated with the
  Cash Flow Timeline.

• Collection float
• Disbursement float

• Invoicing float
• Payment float

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Key Issue
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Describe 6

• Describe the four important financial decisions
  a company must make.

• Capital structure
• Investing decisions
• Financing decisions
• Dividend decisions

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Differentiate 1

• Differentiate among the four factors which have
  played a significant role in shaping and
  reshaping the corporate financial function.

quality management
A factor which continues to challenge Treasury
departments as they are continuously challenged
to produce desired results at acceptable costs.
Developments which have prompted a
re-examination of how treasury is organized, how
it functions and the efficiency with which it
operates. Companies replace legacy systems,
fully integrated reporting or ERP systems, and
have developed extensive disaster recovery plans
for critical systems. The establishment of the
Euro, global treasury management operations, and
increasing use of financial risk management tools
contribute to this trend.
reorganization of treasury operations
technology issues
globalization