CASH AND

MARKETABLE
SECURITIES

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When corporate treasurers use the term, they mean:
● Currency and demand deposits in addition to C
A
very safe, highly liquid marketable securities
that can be sold quickly at a predictable price

S
and thus be converted to bank deposits.
● “cash” as reported on balance sheets generally
includes short-term securities, which are also
called “cash equivalents”.
H
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 Firm’s Marketable Security Holdings

Operating short-term Other short-term

securities
Held primarily to provide
liquidity and are bought and sold
as needed to provide funds for
operations
securities
Holdings in excess of the
amount needed to support
normal operations.

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 CURRENCY
Fast-food operators, casinos,
hotels, movie theaters, and few
other businesses hold substantial
amounts of currency.

But the importance of currency

has decreased over time due to
the rise of credit cards, debit
cards, and other payment
mechanisms.

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 CURRENCY

Holding more
currency, would Generally, Currency
raise capital represents a small
costs and tempt part of total cash
robbers. holdings.

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DEMAND DEPOSITS
Also called as checking deposits that
are used for transactions – paying for labor
and raw materials, purchasing fixed assets,
paying taxes, servicing debt, paying
dividends, and so forth.

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 Techniques to Optimize Deposit Holdings:
1 Hold marketable securities rather than demand
deposits to provide liquidity.
2 Borrow on short notice,
3 Forecast payments and receipts better.
4 Speed up payments.
5 Use credit cards, debit cards, wire transfers, and direct
deposits.
6 Synchronize cash flows.

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MARKETABLE SECURITIES
• These are financial instruments that can be bought and
sold easily in a public market.
• It’s highly liquid, easily transferable, lower rate of
return, and highly marketable.
• It is used in the valuation of various liquidity ratios like
cash ratio, quick ratio, and current ration.

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Why invest in Marketable Securities?
• Generates additional profit.
• Best way to pay short term liabilities.
• Helps company meets regulatory
requirements.

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 Types of Marketable Securities
a) Marketable Debt Securities – government bonds and
corporate bonds
b) Marketable Equity Securities- common stock and most
preferred stock
c) Money market instruments, derivatives, and indirect
investments.

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 Treatment

Current Asset If it is less than one year

Non Current Asset If it is more than one year

Cash and Cash Equivalent If it is used as Working Capital

Long Term Investment If company holds equity of

another company with an
intention to acquire it in future.

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INVENTORIES

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INVENTORY
• A physical resources that a firm holds in stock with
the intent of selling it or transforming it into a more
valuable state

• It includes supplies, raw materials, work-in process,

and finished goods.

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Types of Inventory
• Raw materials are materials and components that
are inputs in making the final product.

• Work in process refers to goods in the

intermediate stage of production.

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Types of Inventory
• Finished goods consist of final product that are
ready for sale.

• Maintenance, repair, and operation inventory

(MRO inventory) is all consumable materials,
supplies, and equipment needed for manufacturing
that are not part of ending finished goods inventory.

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Supply Chain Management (SCM)
• Management of the flow of goods and services and
includes all processes that transform raw materials
into final products.

• It involves the active streamlining of a business’

supply-side activities to maximize customer value.

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 INVENTORY MANAGEMENT
• A systematic approach to sourcing, storing, and selling
inventory—both raw materials (components) and finished
goods (products).
• In business terms, inventory management means the
right stock, at the right levels, in the right place, at the
right time, and at the right cost as well as price.

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Twin Goals of Inventory Management:

1 2
to ensure that the to hold the costs of
inventories needed to ordering and carrying
sustain operations are inventories to the lowest
available, but possible level.

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 Importance of Inventory Management

From a product perspective, the importance of

inventory management lies in understanding what stock
you have on hand, where it is in your warehouse(s), and
how it’s coming in and out.

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 Example:

Suppose a company has sales of $120 million and an inventory

turnover ratio of 3. This means the company has an inventory level of

Inventory = Sales / (Inventory turnover ratio)

= $120 / 3
= $40 million

If the company can improve its inventory turnover ratio to 4, then its inventory will fall to

Inventory = $120 / 4
=$30 million

This $10 million reduction in inventory boosts free cash flow by $10 million.

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 THANK YOU!
PRESENTORS

Balansag, Ma. Diana Macalood, Rianne Christine

Ferrer, Jelielou Mesiona, Giah Doreen

Salvan, Kristine Mae

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