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Chapter 6
Chapter 6 - Outline
What
LT 6-1
is Working Capital Management? Term Structure of Interest Rates U.S. Government Securities Short-Term vs. Long-Term Financing Working Capital Financing Plans
McGraw-Hill/Irwin
LT
PPT 6-1
Working
Capital Management is controlling and managing the current assets of a firm Most time-consuming job of a financial manager Crucial to long-term success or failure of a business
McGraw-Hill/Irwin
McGraw-Hill/Irwin
PPT 6-9 FIGURE 6-6 Using long-term financing for part of short-term needs
II
II
McGraw-Hill/Irwin
McGraw-Hill/Irwin
PPT 6-9 FIGURE 6-7 Using short-term financing for part of long-term needs
II
Term Structure of Interest Rates is also known as the Treasury Yield Curve Graph showing the relationship between S/T and L/T interest rates at different maturities Normal shape is an upward sloping curve, indicating that L/T interest rates are greater than S/T interest rates
McGraw-Hill/Irwin
McGraw-Hill/Irwin
LT 6-5
IV
PPT 6-11
riskier Long-term financing is more expensive but less risky (or safer) Firm must decide the appropriate mix Similar to the risk-return trade-off
McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc., All Rights Reserved. McGraw-Hill/Irwin 2005 The McGraw-Hill Companies, Inc., All Rights Reserved.
IV
PPT 6-11
PPT 6-12
IV
McGraw-Hill/Irwin
McGraw-Hill/Irwin
PPT 6-12
IV
McGraw-Hill/Irwin
PPT 6-13
VI
TABLE 6-11 Asset liquidity and financing assets
McGraw-Hill/Irwin