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14 Cards in this Set
- Front
- Back
- 3rd side (hint)
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3 factors that affect the working capital needed |
1. The nature of the business 2. The efficiency of the management 3. The seasonal fluctuations exposure |
Nature, Effieciency, Fluctuations |
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Definition of JIT procurement |
Obtaining goods from suppliers at the latest possible time, thus avoiding the need to carry any inventories. Deliveries will be small and frequent rather than in bulk. |
Time, size of inventory and frequency of the deliveries. |
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6 BENEFITS IN USING JIT |
1. Reduction in inventory holding costs 2. Reduced manufacturing lead times 3. Improved labour productivity 4. Reduced scrap, rework, warranty costs 5. Price reductions on purchased materials 6. Reduction in the number of accounting transactions. |
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DISADVANTAGES OF JIT |
1. Requires close working relationship with suppliers 2. Higher working capacity needed when there is high seasonal demand 3. Any shortfalls could lead to delays in delivery and loss of customers because there is no buffer inventory to fall back on.
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3 MOTIVES FOR HOLDING CASH |
⚫Transactions Motive ⚫Precautionary Motive ⚫Speculative Motive |
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OVERTRADING |
Excessive trading by a business with insufficient long-term capital at its disposal, raising the risk of liquidity problems |
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SYMPTOMS OF OVERTRADING |
⚫Rapidly increase -Revenue -Current/non current assets -Assets financed by credit and not proprietors' capital -Inventory/Receivables > sales ⚫current and quick ratios drop ⚫current liabilities>current assets |
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FOUR FACTORS TO BE CONSIDERED WHEN INVESTING CASH SURPLUS |
1. RISK ( unsytematic & systematic ) 2. Liquidity 3. Maturity 4. Return |
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8 ROLES OF THE TREASURER |
1. Corporate financial objectives 2. Liquidity management 3. Funding management 4. Currency management 5. Corporate finance 6. Corporate taxation 7. Risk management and insurance 8. Pension fund investment mgmnt |
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ADVANTAGES OF DECENTRALISED CASH MANAGEMENT |
1. Sources of finance can be diversified 2. Greater autonomy can be given to subsidiaries and divisions 3. More responsive to the needs of individual operating units 4. More limited opportunities on a short-term basis |
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METHODS TO EASE CASH SHORTAGE |
1. Postponing capital expenditure 2. Chasing/ Pressing accounts receivable for early settlement 3. Resell previously acquired assets 4. Reduce or postpone cash outflow 💥 Negotiate longer credit period 💥 Reschedule loan repayment 💥 Deferr company tax payment 💥 Reduce divident payments |
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MONEY MARKET INSTRUMENTS |
1. Bills 2. Certificate of deposits 3. Commercial paper 4. Deposits |
B C C D |
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NATURE OF FINANCIAL INSTRUMENTS |
1. Sterling certificates of deposit 2. Local authority bonds 3. Finance houses of deposit 4. Treasury Bill -raise by Bank of England -redeemable at nominal value |
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BUSINESS ANGEL |
A wealthy individuals or group of individuals, who invest in a small businesses |
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