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Table of Contents MAS 3

The document outlines key concepts in financial management, including cash flows, financial planning, budgeting, working capital management, cost of capital, and cost-volume-profit analysis. It covers theoretical and practical applications, such as developing statements of cash flows, managing current assets and liabilities, and understanding cost behaviors. Additionally, it provides frameworks for financial planning and decision-making, supported by references for further reading.

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16 views5 pages

Table of Contents MAS 3

The document outlines key concepts in financial management, including cash flows, financial planning, budgeting, working capital management, cost of capital, and cost-volume-profit analysis. It covers theoretical and practical applications, such as developing statements of cash flows, managing current assets and liabilities, and understanding cost behaviors. Additionally, it provides frameworks for financial planning and decision-making, supported by references for further reading.

Uploaded by

youdonotknowme0303
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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TABLE OF CONTENTS

CASH FLOWS, FINANCIAL PLANNING AND BUDGETING

I. Statement of Cash Flows (Theory)


i. Pro-forma Statement of SCF
ii. Classification of Cash Flow Activities
a. Operating Activities
b. Investing Activities
c. Financing Activities
iii. Presentation of Operating Activities
a. Direct Method
b. Indirect Method
II. Developing the Statement of Cash Flows (Application)
i. Classifying Inflows and Outflows of Cash
ii. Application of Direct and Indirect Method in presenting CF Activities
III. Interpreting the SCF (Theory and Application)
i. Usefulness of the Statement of Cash Flows
ii. Use of SCF in measuring the Firm’s:
a. Financial Liquidity
b. Financial Flexibility
c. Operating Cash Flow (OCF)
d. Net Operating Profit After Taxes (NOPAT)
iii. Free Cash Flow
IV. The Financial Planning Process (Theory)
i. Long-term (Strategic) Financial Plans
ii. Short-term (Operating) Financial Plans
V. Cash Budgets
i. The Sales Forecast
ii. Preparing the Cash Budget
a. Cash Receipts
b. Cash Disbursements
c. Net Cash Flow, Ending Cash, FINANCING, and Excess Cash
iii. Optimal Cash Balance
a. The Baumol Model
b. The Miller-Orr Model
c. Other Factors Influencing the Target Cash Balance
iv. Evaluating the Cash Budgets
v. Scenario Analysis in Cash Budgets
vi. Cash Flow within the Month
VI. Profit Planning: Pro Forma Income Statement
i. Use of percent-of-sales method
ii. Considering types of costs and expenses
VII. Preparing the Pro Forma Balance Sheet
i. Use of Judgmental Approach

Possible References:

 Cabrera, MEB. C. Management Advisory Services 2009 Edition. GIC Enterprises & Co., Inc.
 Gitman, L.J and Zutter, C.J. Principles of Managerial Finance 13th Edition. Prentice Hall
TABLE OF CONTENTS

WORKING CAPITAL MANAGEMENT (CURRENT ASSETS)

I. Net Working Capital Fundamentals


i. Working Capital Management
ii. Net Working Capital
a. Calculating Net Working Capital
b. Strategies for Managing Net Working Capital
iii. Trade-offs Between Profitability and Risk
II. Tracing Cash and Net Working Capital
i. The Operating Cycle
ii. The Cash Conversion Cycle
iii. Funding Requirements
a. Conservative and Aggressive Funding Strategies
III. Cash Management Techniques
i. Synchronizing Cash Flows
ii. Using Floats
iii. Accelerating Cash Collections (Speeding Up Collection)
iv. Slowing Disbursements (Slowing Down Payments)
v. Reducing the Need for Precautionary Balance
vi. Cash Concentration
IV. Marketable Securities Management
i. Objectives of Marketable Securities Management
ii. Reasons for Holding Marketable Securities
iii. Factors influencing the Choice of Marketable Securities
iv. Type of Marketable Securities
V. Accounts Receivable Management
i. Objectives of AR Management
ii. Credit Policy
a. Credit Standards
(1) Five C’s of Credit
(2) Credit Scoring
b. Credit Terms
(1) Credit Terms
(2) Cash Discount
(3) Cash Discount Period
(4) Credit Period
c. Collection Policy/Credit Monitoring
(1) Average Collection Period
(2) Aging of AR
d. Delinquency and Default
iii. Trade-offs in Credit and Collection Policies
iv. Analyzing Proposed Changes in Credit Policy
v. Marginal or Incremental Analysis of Credit Policies
VI. Inventory Management
i. Differing Viewpoints about Inventory Level
ii. Common Techniques for Managing Inventory
a. ABC System
b. Economic Order Quantity (EOQ) Model
c. Just-in-time System
d. Materials Requirement Planning (MRP)

Possible References:

 Cabrera, MEB. C. Management Advisory Services 2009 Edition. GIC Enterprises & Co., Inc.
 Gitman, L.J and Zutter, C.J. Principles of Managerial Finance 13th Edition. Prentice Hall
TABLE OF CONTENTS

WORKING CAPITAL MANAGEMENT (CURRENT LIABILITIES)

I. Short-term Financing
i. Short-term Financing Define
ii. Factors in Selecting a Source of Short-Term Funds
II. Accounts Payable Management
i. Role in the Cash Conversion Cycle
ii. Analyzing and Estimating Credit Terms
a. Accruals
b. Cost of Trade Credit
c. Cost of Bank Loans
d. Cost of Commercial Paper
iii. Effects of Stretching Accounts Payable
III. Sources of Short-term Funds:
i. Spontaneous Liabilities vs. Non-spontaneous Liabilities
ii. Unsecured Credit vs. Secured Credit
a. Unsecured Sources of Short-term Loans
(1) Bank Loans
(2) Commercial Paper
(3) International Loans
b. Secured Sources of Short-term Loans
(1) Accounts Receivable as Collateral
(a) Pledging or Assignment Accounts Receivable
(b) Factoring of Accounts Receivable
(2) Inventory as Collateral/Inventory Financing
(a) Floating Inventory Liens
(b) Trust Receipt Inventory Loans
(c) Warehouse Receipt Loans

Possible References:

 Cabrera, MEB. C. Management Advisory Services 2009 Edition. GIC Enterprises & Co., Inc.
 Gitman, L.J and Zutter, C.J. Principles of Managerial Finance 13th Edition. Prentice Hall
TABLE OF CONTENTS

COST OF CAPITAL, LEVERAGE AND CAPITAL STRUCTURE

I. Overview of the Cost of Capital


i. Basic Concept of Cost of Capital
ii. Sources of Long-term Capital
a. Cost of Long-Term Debt
(1) Net Proceeds
(2) Before-Tax Cost of Debt
(3) After-Tax Cost of Debt
b. Cost of Preferred Stock
(1) Preferred Stock Dividends
(2) Calculating the Cost of Preferred Stock
c. Cost of Common Stock
(1) Finding the Cost of Common Stock Equity
(a) CAPM Approach
(b) Generalized Risk Premium or Bond Yield Plus Risk Premium Approach
(c) Dividend Yield Plus Growth Rate Approach
(d) Discounted Cash Flow (DCF) Approach
(e) Earnings-Price Ratio Method
(2) Cost of Retained Earnings
(3) Cost of New Issues of Common Stock
iii. Weighted Average Cost of Capital (WACC)
a. Calculating WACC
b. Weighting Schemes
II. Leverage
i. Operating Leverage
ii. Financial Leverage
iii. Total Leverage
III. The Firm’s Capital Structure
i. Types of Capital
ii. External Assessment of Capital Structure
iii. Capital Structure Theory
iv. Optimal Capital Structure Theory
IV. EBIT-EPS Approach to Capital Structure
V. Optimal Capital Structure

Possible References:

 Cabrera, MEB. C. Management Advisory Services 2009 Edition. GIC Enterprises & Co., Inc.
 Gitman, L.J and Zutter, C.J. Principles of Managerial Finance 13th Edition. Prentice Hall
TABLE OF CONTENTS

COST-VOLUME PROFIT ANALYSIS

I. Cost Concepts
i. Definition of Cost
ii. Type of Costs:
a. Fixed Costs
b. Variable Costs
c. Semi-variable Costs
iii. Cost Behavior:
a. Linear vs. Non-Linear Costs
b. Relevant and Irrelevant Costs
iv. Direct vs. Indirect Costs
v. Product vs. Period Costs
vi. Prime Cost and Conversion Cost
II. Understanding Fixed and Variable Costs
i. Characteristics of Fixed Costs
ii. Characteristics of Variable Costs
iii. Examples of Fixed and Variable Costs in Business
III. Introduction to Cost-Volume-Profit Analysis
i. Definition of CVP Analysis
ii. Importance of CVP Analysis in Decision Making
IV. Assumptions of CVP Analysis
i. Single Product Analysis
ii. Constant Sales Price
iii. Constant Variable Cost Per Unit
iv. Fixed Costs Are Constant
v. All Produced Units Are Sold
V. Contribution Margin
i. Definition and Calculation of Contribution Margin
ii. Contribution Margin Ratio
iii. Importance of Contribution Margin in CVP Analysis
VI. Break-even Analysis
i. Definition of Break-even Point
ii. Calculation of Break-even Point in Units
iii. Calculation of Break-even Point in Sales Dollars
iv. Graphical Representation of Break-even Analysis
VII. Target Profit Analysis
i. Definition of Target Profit
ii. Calculation of Units Needed to Achieve Target Profit
iii. Calculation of Sales Dollars Needed to Achieve Target Profit
VIII. Margin of Safety
i. Definition of Margin of Safety
ii. Calculation of Margin of Safety in Units and Sales Dollars
iii. Importance of Margin of Safety in Business Decisions
IX. Sensitivity Analysis in CVP
i. Definition of Sensitivity Analysis
ii. Impact of Changes in Sales Price, Variable Cost, and Fixed Costs
iii. Scenario Analysis

Possible References:

 Cabrera, MEB. C. Management Advisory Services 2009 Edition. GIC Enterprises & Co., Inc.
 Gitman, L.J and Zutter, C.J. Principles of Managerial Finance 13th Edition. Prentice Hall
 Rodelio Roque. Management Advisory Services. Textbook

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