1. Prepared by:
Bhargav Joshi
Jaypal Chavda
Nikit Rajani
Jay Raval
Vishal Ghoghari
Dept. of Business Admin., Bhavnagar University,
Bhavnagar.
Guided by:
Dr. B.C. AJMERA
SUBMITTED TO:
RECEIVABLE MANAGEMENT
CASH MANAGEMENT
INVENTORY MANAGEMENT
2.
3. ASPECTS OF MANAGEMENT OF DEBTORS
CREDIT POLICY – Decision on credit period to be
allowed , early payment discount rates etc .
CREDIT ANALYSIS – Decision on whether credit can
be extended to a particular customer .
CONTROL OVER RECEIVABLES –Step for debtor
follow –up , faster collection of debtors.
6. FACTOR AFFECTING CREDIT PERIOD
NATURE OF PRODUCT
QUANTUM OF SALES
CUSTOMS AND PRACTIES
FUND AVALIABLE WITH THE COMPANY
CREDIT RISK
7. FACTOR ANALYSED BEFORE CREDIT
GRANT TO CUSTOMER
NATURE OF PRODUCT
NATURE OF CUSTOMER
QUANTITY PURCHASED
VALUE OF SALES
CREDIT WORTHNESS OF THE CUSTOMER
RISK OF BAD DEBTS
8. IMPORTANT SOURCE OF CREDIT
INFORMATION OF CUSTOMER
TRADE REFERENCE
BANK REFERANCE
CREDIT BUREAU REPORT
PAST EXPERIENCE
PUBLISHED FINANCIAL STATEMENT
9. Basic steps of receivable
management
Find out the profit
Find out the turn over
Find out the investment
Find out the total cost
Find out the next profit
10. A company is selling a product of Rs.10, all
credit sales of 30,000 units V.c. is 6 Rs, A.c. is
Rs.8, F.c. is 60,000. collection period is 30 days.
Company wants to relaxes its credit standards
and that will result 15% increase in sales. The
average collection period would be increase to
45 days. There is no any bed debt exp. O.c. is
15%.
In the right of above case, should the firm
relaxe the credit standard?
11.
12. CASH
Cash is one of the most liquid and important
components of working capital.
Holding cash involves cost because the worth of cash
held, after a year will be less than the value of cash as
on today.
Excess of cash balance should not be kept in business
because cash is a non-earning asset.
Hence, a proper and judicious cash management is of
utmost importance in business.
13. What Are The Primary Motive
For Cash Management ?
PREVENTION IS BETTER THAN CURE
TRANSCATION NEEDS
SPECULATIVE NEEDS
PRECAUTIONARY NEEDS
COMPENSATING NEEDS
14. Objectives of cash management
Meeting payment schedule
• Prevent insolvency
• Relationship is not strained with bank
• Fostering good Relation
• Cash discount can be availed
• Good credit rating
• Pay unexpected expenses
Minimizing funds committed to cash balance
High level of cash balance
Low level of cash balance
15. Factors determine the required
cash balances
Short costs
expense
incurred
shortfall of cash
Transaction
cost
brokerage
incurred
Borrowing cost
borrowing to
cover the
shortage
Loss of cash discount
A substantial loss
because of temporary
shortage of cash
Penalty rate
by banks to meet a
shortfall in
compensating balance
Excess cash
balance cost
Excessively
large cash
balance
Procurement &
management
Establishing &
operating cash
mgt. staff &
activity
Salary ,
handling of
security etc.
Uncertainty &
cash management
Flood, fire etc.
16. CASH MANAGEMENT MODEL
MODEL CAN BE CLASSIFIED INTO THREE CATEGORIES
• It assume that the demand for cash can be
predicted with certainty , provides cost
efficient transaction & conversion cost .
BAUMOL MODELS
C.C.= Tb⁄c
• Optimum cash balance level which
minimizes the cost of cash management
MILLER-ORR MODELS
M.O. = √3br2⁄4i
• It can be determined through multiple
linier programming methods .
ORGLER’S ANALYTICAL
MODELS
Maximize profit= a1x1+a2x2
17. Cash budget
Statement inflow & outflow cash estimate
it’s short term requirement
The cash budget helps the firm to plan for the actual
receipt and disbursement of cash.
It has three parts namely, cash collections, cash
payments & cash balance
The company estimates the sales for
each period during the planning period
18. Cash management techniques/
process
Speedy cash collection
Prompt payment by customers
Every conversion of payments into cash
concentration banking
Lock box system
Slowing disbursements
Avoidance of early payment centralized disbursements
19. Contents
Meaning of Inventory
Concept of inventory
Types of inventory and Reasons for holding inventory
Inventory costs
Purpose of inventory
Tools / Techniques for Inventory control
Functions of inventory
Reasons for inventory carrying
Cost of inventory accumulation
Major activities in inventory control
Conclusion
20. – Inventory refers to a stock of
goods, commodities, or other economic
resources that are held by firms at a particular
time for their future production requirement and
for meeting future demands.
– Inventory management assist organizations in
minimizing their inventory cost without
compromising on their ability to respond quickly
to customer demand.
Meaning of Inventory
21. – Inventory control refers to
the process whereby the
investment in materials and
parts carried in stock is
regulated within pre-
determined limits set in
accordance with the
inventory policy established
by the management.
22. Important Of INVENTORY
Inventories represent a significant amount of firm's
assets.
Inventories must be properly managed so that this
investment doesn't become too large, as it would result
in blocked capital which could be put to productive
use elsewhere.
On the other hand, having too little or small inventory
could result in loss of sales or loss of customer
goodwill. An optimum level of
inventory, therefore, should be maintained.
23. 3/19/2014 23
Concept of inventory
Inventory Can be defined as a usable
resources which is physical and tangible.
Inventory management aims at
maintaining an adequate supply or
something to meet the expected demand
pattern subject to budgeting
considerations.
24. Inventory could be raw-materials, WIP,
finished products or the spare parts and
other indirect materials.
25. Inventory turnover ratio = Annual demand /
Average Inventory
- It is an index of business performance.
Sound management gives a higher
inventory turnover ratio.
26. Types of inventory and Reasons
for holding inventory
Raw materials Inventory
Stores and Spares
Work-in-Process Inventory
Finished Goods Inventory
Maintenance, repair, and operational
(MRO) inventory
27. Inventory costs
Purchase cost
- Cost of purchasing a unit of item
Holding (or carrying) costs
- Costs for storage, handling, insurance, etc.
Setup (or production change) costs
- Costs for arranging specific equipment setups, etc.
28. Ordering costs
Costs of placing an order, etc.
Stock out costs
Costs incurred due to shortage of stock, loss of sale
etc.
29. Cost Minimization Goal
Ordering Costs
Holding
Costs
Order Quantity (Q)
C
O
S
T
( Rs.)
Annual Cost of
Items (DC)
Total Cost
By adding the item, holding, and ordering costs together, we
determine the total cost curve.
30. Purpose of inventory
Smooth production
Better services to customers
Protection against business uncertainties
Take advantage of quantity discounts
31. Reasons for Inventories
Improve customer service
Economies of purchasing
Economies of production
Transportation savings
Hedge against future
Unplanned shocks (labor strikes, natural
disasters, surges in demand, etc.)
To maintain independence of supply chain
33. Economic Order Quantity ( EOQ ) model
ABC Analysis
FSN Analysis
HML Analysis
Tools / Techniques for Inventory
control
34. Functions of inventory
Regularizing demand and supply
Economizing purchases or
productions by lot buying or
batch production
Allowing Organizations to cope with
perishable materials
Inventory can store labour
35. Cost of inventory accumulation
Disadvantages of
inventory accumulation
Locking up of working
capital
More storage space
High storage charges
High taxes
Greater handling and
distribution cost
Deterioration in
quality
Disadvantages of
inventory depletion
Production stoppages
Idle machine capacity
Burden of fixed overhead
Failure to meet delivery order
resulting into loss of goodwill
36. Major activities in inventory control
Planning the inventory
Procurement of inventory
Receiving and inspection of inventory
Carrying and issuing of inventory
Recording the receipts and issues of
inventory
Follow-up function
Material standardization and substitution
37. In nutshell, we can say that the
objective of inventory management is to
order the right quantity, at the right
time without disrupting the production
process.
Conclusion