MGTA01H3 Chapter Notes - Chapter 12: Cash Flow, Corporate Finance, Trade Credit

• School: UTSC
• Department: Management (MGT)
• Course: MGTA01H3
• Professor: Chris Bovaird

Document Summary

Helping to manage the risk that the firm takes: a financial manager"s overall objective is to increase a firm"s value and thus stockholder"s wealth. To handle these short-term expenditures , financial managers must pay attention to accounts payable, accounts receivable, and inventories: credit policy: rules governing a firm"s extension of credit to customers. -this policy sets standards as to which buyers are eligible for what type of credit. Inventory: materials and good currently held by the company that will be sold within the year. - too little inventory can cost a firm sales. Too much means tied-up funds that cannot be used elsewhere. -there are three basic types of inventories: raw materials, work-in-process, and finished good: a. -companies try to reduce working capital because (1) every dollar that is not tied up in working capital becomes dollar of more useful cash flow; (2) reduction of working capital raises earning permanently . Reducing working capital, therefore, means saving money: 2.