Accounts receivable Management Size of Investment in Accounts Receivable Percent of credit sales to Total sales Level of sales Terms of sale Quality of customer Collection Efforts

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?

Balance sheet Current Current Assets Liabilities Debt and Fi Ixed Preferred Assets Shareholders

0: What are SECURITIes? A: Financial assets that Investors purchase hoping to earn a high rate of return

Where we've been. Basic Skills:(Time value of money, Financial Statements) Investments: (Stocks, Bonds, Risk and Return) Corporate Finance: (The Investment Decision- Capital Budgeting)

Capital Budgeting: the process of planning for purchases of long-term assets. example Our firm must decide whether to purchase a new plastic molding machine for $127,000 How do we decide? Will the machine be profitable? Will our firm earn a high rate of return on the investment?

Security valuation In general, the intrinsic value of an asset= the present value of the stream of expected cash flows discounted at an appropriate required rate of return

Chapter 6: Objectives Inflation and rates of return How to measure risk (variance, standard deviation, beta) How to reduce risk (diversification) How to price risk (Security market line, CAPM)

Financial forecasting 1) Project sales revenues and expenses

Income statement SALES EXPENSES PROFIT