The most comprehensive educational resources for finance

Why Finance is Reconsidering Trade and Transport Investments

Trade and transportation are the driving forces behind every developed economy in the world. Thriving nations must import and export goods in order to survive, maintain their infrastructure and support the market. The finance sector has long seen these factors as justification for continual investment and support, and indeed, trade is not liable to cease

Choices of Short-term Funding Available to a Company

A company has access to many short-term sources of funding. These include funding from both bank and non-bank sources. Short-term Funding from Banks A company can avail short-term funding from banks in the following forms: Lines of Credit This is the most common form of funding for working capital needs. In this case a bank

Calculating the Cost of Trade Credit

Trade credit is an important source of liquidity and financing for any company. The company needs to manage its accounts payables effectively and take advantage of the credit period to minimize its cost of funds. An important decision here is whether it is beneficial for the company to pay within the discount period or pay

Management of Accounts Payable

Accounts payable are the amounts that are due to the suppliers of goods and services to the business. For example, a furniture chain buys its raw material from various suppliers on credit. Accounts payable arise from trade credit, which is an important portion of working capital.  It works in favor of both the buyer and

Management of Inventory

Management of inventory is another important aspect of a business. The goal here is to maintain an optimal level of inventory. If the inventory levels are too low, it can lead to a loss of sales because of stock-outs. At the same time, if there is too much inventory, it indicates that the firm’s excess

Evaluating Management of Accounts Receivables

In any business it is a usual practice to provide credit to your customers. Granting credit helps the business in increasing sales but at the same time also increases the risk of uncollectible accounts. The company needs to actively manage and monitor the accounts receivables and evaluate how well the company is managing its receivables.

Evaluating the Management of Short-term Funds

Based on their short-term investment policy, the treasurer can effectively manage the short-term funds, including short-term investments, borrowings, etc. There are sophisticated treasury management software available to do this. A treasury manager based on his needs, size of the funds, and complexity in the portfolio may decide to use a treasury software or simply do

Short Term Investment Strategies

A key element of working capital optimization is the short-term investment strategies treasurers undertake. They are a vital tool of risk management, but are somewhat more limited in their type and maturity than long term strategies. Liquidity and security are the twin objectives managers look for in short term investments. Short- term strategies fall into

Managing the Cash Position of a Firm

One of the most important activities in a business is to manage its day to day cash position. The goal is to ensure that the net cash position is not negative and at the same time there is not too much excess idle cash. Ideally, a business would want its cash inflows and outflows to

Sources of Liquidity and Factors Affecting Firm’s Liquidity

The liquidity of a firm refers to its ability to meet short-term obligations using firm’s assets can be quickly converted to cash. Cash is the most liquid form of asset a firm has. Different assets offer different levels of liquidity. For example a firms inventory is considered a liquid asset but may not be as