receivables mgt
TRANSCRIPT
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RECEIVABLES MGT
A\C Receivables, Sundry Drs,Trade Drs,
Book Debt
Component of WC
Current Asset
Level of Liquidity
1\3 of Total CAs
Substantial Investment
Avg. Daily Cr Sale X Collection Period
Expressed in terms of Cost of Sales
Obj: To Maximize value to the firm
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Receivables Mg t:Chal lenge
Design a CREDIT POLICY
Vo lum e of Credit Sale
Cred it Standards
Credi t Analysis Credit Terms-Cr period ,CD,CD period ,
Col lect ion Effort
Str ingent o r Lenient \ Liberal po l icy
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Credit Policy1. Marketing Tool2. Meet Competition3. Wean Customers from Competitors4. Customer Retention5. Market Share
6. Cr Policy Evaluated for Costs-ReturnsCosts Admin Costs\Collection Costs
Capital Costs Selling Costs Delinquency Costs Bad Debt Cost or Default Costs
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Optimum Credit PolicyMarginal Cost-Benefit AnalysisIncremental Costs & Returns equal to Incremental
Marginal Investment IMI= Incremental Profits
Incremental InvestmentRequired ROR more than Borrowing Rate
High ROR due to High Risk
Four Steps for Optimization1. Estimate Incremental Operating Profits2. Estimate Incremental Investment3. Estimate Incremental ROR on Investment4. Compare Incremental ROR with Required ROR
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1. Credit Standards: High, Good, Fair,OK2. Credit Analysis:Current Ratios, ACP, Quick Ration, D:E Ratio
Bank ReferencesNumerical Credit Scoring: W1, W2, W3 for Income
Level, Years in Business, Debt Portion3. Credit Terms
4. Collection ProgramTrained StaffMonitoring receivablesLetters, mails, SMS, TelephoneThreat of Legal Action
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Monitoring of Receivables
1. Days Sales Outstanding2. Ageing Schedule3. Collection Matrix
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INTERNATIOINAL TRADEBretton Woods Agreement-IMFBase Currency- US$
Models1. Adam Smith Model-Cost Advantage
2. Ricardian Model-Technology3. Heckscher-Ohlin Model-Factors of
Production
4. New Trade Theory-competition, Returnon Scale5. Gravity Model-Distance betweencountries
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European
Union
4,567.0 2011 est.
1 United States 3,969.0 2012 est.
2 China 3,801.0 2012 est.
3 Germany 2,768.0 2012 est.
4 Japan 1,649.8 2012 est.
5 France 1,226.4 2012 est.
6United
Kingdom1,127.0 2012 est.
7 South Korea 1,068.7 2012 est.
8 Netherlands 1,046.6 2012 est.
9 Canada 962.6 2012 est.
10 Italy 953.0 2012 est.
11 Hong Kong 938.4 2012 est.
12 Russia 900.6 2012 est.
13 Singapore 821.0 2012 est.
14 India 809.4 2012 est
http://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Indiahttp://en.wikipedia.org/wiki/Singaporehttp://en.wikipedia.org/wiki/Russiahttp://en.wikipedia.org/wiki/Hong_Konghttp://en.wikipedia.org/wiki/Italyhttp://en.wikipedia.org/wiki/Canadahttp://en.wikipedia.org/wiki/Netherlandshttp://en.wikipedia.org/wiki/South_Koreahttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/United_Kingdomhttp://en.wikipedia.org/wiki/Francehttp://en.wikipedia.org/wiki/Japanhttp://en.wikipedia.org/wiki/Germanyhttp://en.wikipedia.org/wiki/Chinahttp://en.wikipedia.org/wiki/United_Stateshttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Unionhttp://en.wikipedia.org/wiki/European_Union -
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Foreign Exchange MarketFacilitates currency exchange
Participants or Operators-Central Bank,Commercial Banks, Brokers, MNCs
Type of Operators1. Arbitrageurs-Risk-free, rate
fluctuations only2. Traders- import & export
3. Hedgers-MNCs, Protect value4. Speculators- Profit motive
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Forex Rates
1. Direct quote- per unit of domesticcurrency2. Indirect quote- Units of domestic
currency per unit of foreign currency3. Cross-Rate- Two countries trading in
third countrys currency4. Bid-ask spread-buy & sell premium
5. Forward rate- 30, 90, 180 days
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Foreign currency Option
Right to buy or sell a currency at an agreedrate on or before an agreed maturity period1. Call or buy option
2. Put or Sell option
Financing Operations1. Euro Currency-Syndicated,
LIBOR+premium2. Euro Bonds-Bearer Bonds, Samurai,
yankee, Bull dog
3. Depository Receipts-ADRs & GDRs
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Determinants of Exchange Rates
Inflation Rates-Purchasing Power ParityTheory-Goods of equal value in countries areequated through an exchange ratePPPr= spot rate X (1+Rh)/(1+Rf) R-Inflation ratePPPr= spot rate X Ph/Pf P-Price index
Interest Rates-Interest Rate Parity Theory-
Discount \premium of a currency to anotherreflects the interest rate differential betweenthe two countriesFwd Rate= spot rate X (1+Ih) / (1+If)
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Balance of Payments
Foreign Exchange reserves (includingGold)
Level of Activity & Employment
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MNCs
Trade BarriersImperfect labor marketIntangible assetsVertical integrationProduct life cycleDiversificationShare-Holder Diversification