Ch.18 Working Capital Kes e Management 5 and short-Term Financing @2002. Prentice Hall. Inc
© 2002, Prentice Hall, Inc. Ch. 18: Management and Short-Term Financing
Working-Capital Management Current assets cash, marketable securities, inventory, accounts receivable °Long- Term assets equipment, buildings, land Which earn higher rates of return? Which help avoid risk of illiquidity?
Working-Capital Management • Current Assets – cash, marketable securities, inventory, accounts receivable • Long-Term Assets – equipment, buildings, land • Which earn higher rates of return? • Which help avoid risk of illiquidity?
Working-Capital Management Current assets cash, marketable securities, inventory accounts receivable Long- Term Assets equipment, buildingS, land Risk-Return Trade-offs Current assets earn low returns, but help reduce the risk of illiquidity
Working-Capital Management • Current Assets – cash, marketable securities, inventory, accounts receivable • Long-Term Assets – equipment, buildings, land • Risk-Return Trade-off: Current assets earn low returns, but help reduce the risk of illiquidity
Working-Capital Management Current liabilities short-term notes, accrued expenses accounts payable Long- Term Debt and equity bonds, preferred stock, common stock Which are more expensive for the firm? Which help avoid risk of illiquidity?
Working-Capital Management • Current Liabilities – short-term notes, accrued expenses, accounts payable • Long-Term Debt and Equity – bonds, preferred stock, common stock • Which are more expensive for the firm? • Which help avoid risk of illiquidity?
Working-Capital Management Current liabilities short-term notes, accrued expenses accounts payable Long-Term Debt and equity bonds, preferred stock, common stock Risk-Return Trade-off Current liabilities are less expensive but increase the risk of illiquidity
Working-Capital Management • Current Liabilities – short-term notes, accrued expenses, accounts payable • Long-Term Debt and Equity – bonds, preferred stock, common stock • Risk-Return Trade-off: Current liabilities are less expensive, but increase the risk of illiquidity
Balance sheet Current Assets Current Liabilities Fixed assets Long-Term Debt Preferred stock Common stock To illustrate. let's finance all current assets with current liabilities
Balance Sheet Current Assets Current Liabilities Fixed Assets Long-Term Debt Preferred Stock Common Stock To illustrate, let’s finance all current assets with current liabilities
Balance sheet Current Assets Current Liabilities Fixed assets Long-Term Debt Preferred stock Common stock To illustrate. let's finance all current assets with current liabilities
Balance Sheet Current Assets Current Liabilities Fixed Assets Long-Term Debt Preferred Stock Common Stock To illustrate, let’s finance all current assets with current liabilities
Balance sheet Current Assets Current Liabilities Fixed assets Long-Term Debt Preferred stock Common stock To illustrate. lets finance all current assets with current liabilities and finance all fixed assets with long-term financing
Balance Sheet Current Assets Current Liabilities Fixed Assets Long-Term Debt Preferred Stock Common Stock To illustrate, let’s finance all current assets with current liabilities, and finance all fixed assets with long-term financing
Balance sheet Current Assets Current Liabilities Fixed assets Long-Term Debt Preferred stock Common stock To illustrate. lets finance all current assets with current liabilities and finance all fixed assets with long-term financing
Balance Sheet Current Assets Current Liabilities Fixed Assets Long-Term Debt Preferred Stock Common Stock To illustrate, let’s finance all current assets with current liabilities, and finance all fixed assets with long-term financing
Balance sheet Current Assets Current Liabilities Fixed assets Long-Term Debt Preferred stock Common stock
Balance Sheet Current Assets Current Liabilities Fixed Assets Long-Term Debt Preferred Stock Common Stock
