7/27/2019 Ifm Presentation (1)
1/19
PRESENTATION ONINTERNATIONAL WORKINGCAPITAL MANAGEMENT
PRESENTED BY:
SHWETA SAINI
RAHUL CHAUHAN
BASANT
7/27/2019 Ifm Presentation (1)
2/19
Working capital management in international context
involves managing cash balances, account receivable,
inventory, and current liabilities when faced with political,
foreign exchange, tax, and liquidity constraints.
The overall goal is to reduce funds tied up in working
capital. This should enhance return on assets and equity.
It also should improve efficiency ratios and other
evaluation of performance parameters.
7/27/2019 Ifm Presentation (1)
3/19
CASH
MANAGEMENT
RECEIVABLESMANAGEMENT
INVENTORYMANAGEMENT
7/27/2019 Ifm Presentation (1)
4/19
CASH MANAGEMENT
7/27/2019 Ifm Presentation (1)
5/19
Although cash is only 1-3% of total current assets but its
management is very important.
Management of cash includes: Determination of optimum amount of cash required in
the business.
To keep the cash balance at optimum level and
investment of surplus cash in profitable manner. Prompt collection of cash from receivables and efficient
disbursement of cash.
7/27/2019 Ifm Presentation (1)
6/19
OBJECTIVES OF CASH MANAGEMENT
To maintain optimum cash balance.
To keep the optimum cash balance requirements
at minimum level by prompt collection & late
disbursement etc.
7/27/2019 Ifm Presentation (1)
7/19
FACTORS TO BE CONSIDERED WHILE
DETERMINING THE OPTIMUM CASH
BALANCE Synchronization of cash flows.
Cash shortage costs.
Excess cash balance costs.
Procurement and management costs.
Compensating balance.
Uncertainty. Firms capacity to borrow in emergence.
Efficiency of Management
7/27/2019 Ifm Presentation (1)
8/19
RECEIVABLES MANAGEMENT
7/27/2019 Ifm Presentation (1)
9/19
Receivables management refers to the decision a
business makes regarding to the overall credit,
collection policies and the evaluation ofindividual credit applicants.
Receivables Management is also called trade
credit management.
OBJECTIVES OF RECEIVABLES
MANAGEMENT
to promote sales and profits until that point is
reached where the return on investment infurther funding receivables is less than the cost
of funds raised to finance that additional credit
i.e. cost of capital.
7/27/2019 Ifm Presentation (1)
10/19
TRADE CREDIT VS. CONSUMER CREDIT
Trade Credit :
It occurs when one business sells
goods to another business.
Consumer Credit :
It occurs when a business sells
goods to an individual.
Trade credit terms are more liberal than
consumer credit terms.
7/27/2019 Ifm Presentation (1)
11/19
COST OF MAINTAINING RECEIVABLES
Collection Costs:i.e. for maintenance of credit & collection
department, expenses incurred for obtaining information
about credit-worthiness of potential customers.
Capital Cost/ Cost of Financing Delinquency Costs:
i.e. cost of financing for an extended
period, cost of extra steps to be taken to collect
overdue e.g. reminders, legal charges etc. Default Costs :
E.g. Bad debts etc.
7/27/2019 Ifm Presentation (1)
12/19
BENEFITS OF RECEIVABLES
Increased Sales
Anticipated Profits liberal policy can take two
forms:
Sales Extension
Sales Retention
7/27/2019 Ifm Presentation (1)
13/19
INVENTORY MANAGEMENT
7/27/2019 Ifm Presentation (1)
14/19
Inventories are assets of firm and as such they
represent an investment. Because such investment requires the precious
funds, managers must ensure that the firm
maintains inventories at the correct level.
If they become too large, the firm loses the
opportunity to employ those funds more
effectively. Similarly, if they are too small, the
firm may lose sales.
7/27/2019 Ifm Presentation (1)
15/19
OBJECTIVES OF HOLDING INVENTORY:
Transaction Motive
Precautionary Motive: Strikes, labour problems,
natural calamities etc.
Speculative Motive to earn extra profit due toshortage
Contractual Agreements
7/27/2019 Ifm Presentation (1)
16/19
BENEFITS OF HOLDING INVENTORY
For Trading Concerns
Uninterrupted selling process
Quality discounts
For manufacturing concerns
Uninterrupted production schedule Independent sales activity
TYPES OF INVENTORIES
The common types of inventories for most of thebusiness firms may be classifies as finishedgoods, w-i-p and raw materials.
7/27/2019 Ifm Presentation (1)
17/19
Finished Goods:
These are just ready for sale tocustomers. Inventories of finished goods arise
because of the time involved in production processand the need to meet customers demandpromptly.
Work-in Progress:
The work-in-progress refers to partiallyproduced goods. The value of work-in-progressincludes the raw materials costs, the direct wagesand expenses already incurred and theoverheads, if any.
Raw Materials:The raw materials include the materialswhich are used in the production process andevery manufacturing firms has to carry certainstock of raw materials in stores.
7/27/2019 Ifm Presentation (1)
18/19
DETERMINATION OF STOCK LEVELSBoth the excess and shortage of materials are
harmful for the firms. Hence various stock levels must be determined:
MINIMUM LEVEL: This represents the quality which must be maintained in
hand at all times.minimum Level=Re-ordering level - (Normal consumption Normal re-order
period)
RE-ORDERING LEVEL When the quality of materials reaches at a certainfigure then fresh order is send to get materials again. Re-ordering level is
fixed between minimum level and maximum level.Re-ordering level= Maximum consumption Maximum re-order period.
MAXIMUM LEVEL It is the quantity beyond which a firm should not exceedits stock otherwise there will be overstocking.
Maximum stock level= Re-ordering level + Re-ordering quantity-(Minimumconsumption Minimum re-ordering period).
DANGER LEVEL It is the level beyond which materials should not fall in anycase. If danger level arise then immediate steps should be taken toreplenish the stock even if more cost is incurred in arranging the materials.
Danger level= Average consumption maximum re- order period foremergency purchase
7/27/2019 Ifm Presentation (1)
19/19
THANK YOU
Top Related