Cash Management 2 Flashcards
Working capital finance?
Approach taken to financing the llevel, and fluctuations in level of net working capital
What are non-current assets?
Long-term assets from which an organisation expects to derlive benefit over a numebr of periods
What are permanent current assets?
Minimum current asset base required to sustain normal trading activity
What are fluctuating current assets?
Valuation in current assets during a period
Why is long-term finance generally more expensive than short0term
Investors require higher return for locking money away for a longer period
An aggressive financing strategy
Minimal long-term finance for working capital
A conservative financing strategy
High levels of long-term finance for working capital
Aggressive financing strategy characteristics?
Short-term funds used to finance fluctuating current assets and proportion of permanent current assets
Conservative financing strategy characteristics?
Long-term funds used to finance permanent current assets and a proprtion of fluctuating current assets
Amount of working capital a company chooses (investment or financing)
Investment
Choice of working capital finance strategy?
Management atitude to risk
Strength of relationship with bank providing an overdraft
Ability to raise long-term finance
The functions of treasury
Liquidity management
Risk management
Funding
Corporate finance
Aim of liquidity management?
Ensure company has access to cash but not hold unnecessarily high levels of cash
AIm of funding?
Involves deciding on suitable forms of finance
Why centralise treasury?
Reduced borrowing
Improved expertise
Improved risk management
