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reading 16 (working capital management (negative working capital (risks…
reading 16
working capital management
cash at bank
inventory
receivables
all 3 minus payables
negative working capital
creditors supply finance
risks
late payments
interest penalty 2002 Act
lease finance
assets
acquired by bank
leased to Co.
lessor
lessee
finance lease
owned by bank
benefits and risks
owned by Co.
operating lease
short term
lessor have responsibility
eg car lease, service
benefits
lessor
ownership of asset
secured borrowing
lessee
smaller manageable payments
cash flow benefits
risks
more expensive over time
venture capital and private equity
VC companies
suppliers
or PE
non-public
issuance of shares
avoids listing
on stock exchange
benefits
of private
less cost, management time
faster than LSE
equity finance
unavailable
less exposed to takeovers
better operating environment
future potential to enter previously unavailable
initial public offering
debt factoring
sells receivables
to 3rd party
discounted
reduces
credit exposure
improves
cash flow
banks
overdrafts
suited to
seasonal/temporary
cash flow shortage
negotiate
size of overdraft
interest
fees charged?
review period
covenants
conditions
financial performance
security provided
against overdraft
facilities
one or more
banks
bilateral
syndicate
interest
LIBOR dependant
retained earnings
profits
post-tax
undistributed
equity
selling shares
ordinary
ownership
profit share
after creditors are paid
preference
paid before ordinary