Monday, April 17, 2023

Tools in Managing Cash, Receivables, and Inventory Management

Cash
- lifeline of every firm; one of the components or elements of the current assests of a firm.
- cash as an asset is not good for the firm as it does not generate earnings.
- firm needs to hold just enough cash to carry out operations of the firm.

Cash Management
- process of collection and disbursement of cash.
- cash management is important to generate higher earnings.
- proper management is mainly based on good knowledge and sound judgement
regarding operations and market conditions.

Techniques:
1. Cash Planning and Budgeting
- forecasts all future cash flows (inflows and outflows) with value and timing as
they can on the basis of their experience.
- depends on the knowledge of market conditions (demand for its products,
existing and future competition, interest rates, other money market conditions.)
2. Optimum Cash Balance
- a firm decide what is the optimum cash it must retain in different periods
- computed by examining the overall money market scenario and risk-return
trade-off.
3. Arranging cash in periods of deficiency
- firm must arrange to obtain cash to meet the requirements.
- get cash by sale of investment securities (method)
4. Investing Surplus Cash
- investment of surplus is a continuous process and variety of operations
5. Managing Cash Flows
- accelerate cash inflows and decelerate cash outflows.

Receivables Management
- payments not yet received from customer after goods and services have been
provided.
- book of accounts: Accounts receivable/Trade receivable
- objective is to extend credit to such limit till the incremental profit arising out of
increasing sales is higher than the cost associated with receivables.

Monitoring of Receivables:
1. Average Collection Period - may be worked out on daily or weekly basis; ratio
gives an indication of how many days of sales are uncollected.
 2. Ageing Schedule - number of days since the receivables becomes due. It is the
total outstanding receivables are classified into different age group categories, a
clear picture will emerge about the nature of overdue accounts.
3. Line of credit - fix limits of total credits for individual customers.
4. Accounting Ratios - give good indication of current status of receivables against
past information. Receivable turnover ratio; Average collection period.

Inventory Management
- the materials available which have been bought from outside, manufactured in house.
- insufficient stocks will result in lost sales and delays for customers whereas excessive
stocks in large amounts of funds that get blocked in inventory.

Techniques:
1. Monitoring and Managing Inventories - ratios can be calculated in order to monitor
and manage the inventories like the inventory turnover ratio (effectiveness of inventory
management system).
2. Classifying Inventory - focus attention on all the items at all times which have
maximum effect on the working capital of the organization,
3. Determining Economic Order Quantity, Reorder Point and Safety Stock - it is
necessary to order in batches at periodic intervals; inventory holding cost - optimize the
ordering cost and inventory carrying cost.
The Filipino Values System and Its Effect on Business

Philippine Value System

- includes our own assemblage of consistent ideologies, moral codes, ethical practices,
and cultural and personal values that are promoted by our society.
- rooted primarily in personal alliance

A. Utang na Loob
- debt or gratitude means that one does not forget the good deeds that others may have
done to him/her especially in times of great need.
- sometimes abused by those who have done well to others as they may ask favors or
things that may either be unreasonable or beyond the means of debt.
- recognize, respect, promote, defend the basic dignity of each person.
- direct exchange of goods or favors (Kaut, 1961)
- “contractual” (Hollinsteiner)
- rooted primarily in personal alliance systems based on obligation.
- may be good or bad for business depending on a lot of considerations.

B. Filial Piety
- respect for one’s parents, elders, and ancestors.
- rooted primarily in personal alliance systems based on kinship.
- may be good or bad for business depending on a lot of considerations.

C. Padrino
- patronage in the Filipino culture where one gains favor, promotion, or political
appointment through family affiliation or friendship as opposed to one’s merit.
- has been the source in many controversies
- sometimes exists in Executive

D. Suki
- “loyal customer”; “market-exchange partnership”; can be developed into an
agreement.
- system of patronage wherein a customer regularly buys their merchandise from a
certain client.

E. Bahala Na
- “come what may”, Filipino version of fatalism, leaving everything in the hands of fate.
- “Bathala na”, I have done my part, Let God do the rest.
- erroneously to mean the person’s state of helplessness.
- just letting things happen instead of doing something to make things happen is not a
genuine “Bahala na” value
F. Mañana Habit
- comes from the spanish which means “tomorrow”
- habit is observable is all strata of Philippine society
Punctuality and Tardiness
- Filipino time is minutes or even hours late of the standard time.
- offensive to time-conscious foreigners

G. Amor Propio
- “love of self/self love”; quality of being worthy of esteem or respect is important to
Filipinos.
- “Hiya” or “shame” - one will do everything even if it is beyond his means just to save his
reputation as well as the family’s.
- “Balat Sibuyas” - being easily slighted at perceived insults.

H. Filipino Family Values

1. Hospitality
2. Humor, Adaptability, and Creativity
3. Resilience, Resourcefulness and the Ability to Survive
4. Faith and Religiousity
5. Hard Work and Industry

I. Negative Filipino Traits

1. Bribery and Corruption
2. Double Standards
3. General Disregard for Rules
4. Pagtatakpan
5. Gossiping
6. Ningas-cogon
Monday, April 24, 2023

Basic Long-term Financial Concept

Concepts of Time Value of Money

 Time Value of Money (TVM) - concept that money is available at the present time is
worth more than the identical sum in the future due to its potential earning capacity.
 First step: set up a timeline which helps in visualization.

 Future Values - compounding

FV = future value
PV = present value
N = number of years
i = interest
 Present Values - discounting
 Social Responsibility as Entrepreneurs

Responsibility
- duty or obligation to satisfactorily perform or complete a task.
- can be shared
- can be before and/or after a task
- in ethics and governance, being in charge
- does not necessarily own an explanation
- having authority over one’s actions

Accountability
- obligation to account for its activities, accept responsibility for them and to disclose the
results in a transparent manner.
- being answerable for your actions
- old a person only after a task is done or not done
- in ethics and governance, answerability, blameworthiness, liability
- owes an explanation
- liable for one’s actions

A. Responsibilities and Accountabilities to the Employees

- responsibility of business towards employees is in the form of training, promotion,
proper selection, fair wages, safety, health, etc.
1. Pay Wages and taxes
2. Create and Maintain a Safe Workplace
3. Facilitate Worker’s Compensation Insurance
4. Enforce Anti-discrimination Law (EEO)
5. Create and Maintain a Favorable Working Environment
6. Respect Human Rights
7. Support Career Development
8. Train and Educate Employees
9. Manage Performance
10. Give Rewards and Benefits

B. Responsibility and Accountabilities to the Governement

- the primary responsibility of a business is to its investors, the people who have put up
their own money in an effort to help it succeed. (Milton Friedman, economist)
- businesses should also abide by the laws of the countries. (Wolfe, 2016)
1. Observe Laws, Rules, and Regulations
2. Pay Taxes
3. Follow Environmental Regulations
4. Abide by Labor Laws
5. Avoid Restrictive Trade Practices
6. Disclose Financial Statements
7. Avoid Corruption
8. Assist in Implementing Socio-economic Policies
9. Help Earn Foreign Exchange
10. Advise the Government
11. Complete Promptly Government Contracts
12. Contribute to Government Treasury
13. Contribute to Political Stability

C. Responsibility and Accountabilities to the Creditors

1. Give Correct Information
2. Provide Fair Return on Investment (ROI)
3. Strengthen Share Prices
4. Honor Fiduciary Duties

D. Responsibility and Accountabilities to the Suppliers

- responsible for providing raw materials and resources
- indirectly affect marketing and business aspects such as product quality, price, and
production of goods.
1. Practice Fair Pricing and Licensing
2. Avoid Coercion and Litigation
3. Maintain Stability
4. Maintain Confidentiality
5. Pay on Time
6. Select Suppliers with Discernment

E. Responsibility and Accountabilities to the Consumers

- should win the confidence of consumers, following positive attitudes and social
responsibilities.
1. Ensure Quality of Products and Services
2. Ensure Consumers Health and Safety
3. Provide Easy-to-use products
4. Provide Free Training
5. Be Fair with Prices
6. Be Honest in Advertising and Marketing
7. Be Honest in Dealings
8. Attend to Complaints
9. Service Even After Sales
10. Respect Customers Time
11. Treat Customers Well
12. Ensure Regular Supply
13. Research and Develop to Increase Customer Satisfaction
14. Avoid Monopolistic Competition

F. Responsibility and Accountabilities to the General Public

- understand its corporate responsibilites to the public.
1. Be Fiscally Responsible
2. Consider Public Input
3. Take Care of the Community

G. Responsibility and Accountabilities to the Environment

- include some shares of corporate responsibility, can be from donating money to
charities to activities such as plating trees and recycling wastes.
- affects bottom line and the long-term success of your business.
1. Comply With Environmental Legislation
2. Dispose Waste Properly
3. Recycle
4. Conserve and Protect Biodiversity
5. Prevent and Remedy Damages to Environment
6. Report an Incident
7. Use Scarce Natural Resources Sparingly