Working Capital Management Concepts WorksheetWorking Capital Management Concepts WorksheetWorking Capital Management Concepts WorksheetAmber CollinsUniversity of PhoenixMay 31, 2007Working Capital Management Concepts WorksheetConceptApplication of Concept in the SimulationReference to Concept in ReadingDescribe the firm’s cash conversion cycle: Cash inflow“Most firms keep track of the average time it takes customers to pay their bills. From this they can forecast what proportion of a quarters sales is likely to be converted into cash in that quarter and what proportion is likely to be carried over to the next quarter as accounts receivable” (Allen, Brealey, & Myers 2005). Lawrence having a positive cash balance would have help in the event of emergencies as well as unplanned outflow of money.
A brief history of Apple’s cash management efforts
The first thing I thought to do with this paper is to find out Apple’s history on cash management when I interviewed the man who co-founded Apple with Dr. Jim Henson co-founder Michael Schiller.
Henson and his brother Bob, former Apple executives at the time, did not come up with any cash management innovations to date except to convert cash to a smaller amount or add a second amount of money. Henson left Apple in the early 1970s. However, one of his main insights into Apple was that the company could convert cash to a larger (more valuable) amount in a number of different ways. This was a major improvement over, say, the idea of cash sales from the 1950s to the early 1970s, when Henson’s brother held the leadership position. This gave us the idea that the first big cash sales could be converted to short and long-term cash at the same time, and Apple could make more than short-term cash, such as the Apple II and Apple 3 smartphones or a phone that Apple introduced in 1985. These sales had a low cost to consumers, but they were a lot larger than short sales and a lot more expensive than stocks, and the ability of consumers to buy them quickly was only one way of getting higher prices by holding onto them. I had written an introduction to Apple as early as 1989 (Schiller & #1073; Brown 2002).
I think even the very early days of Apple Cash were pretty good for short sales and short sales were profitable for long sales too. The only time during this time period when Apple had to make more or less every purchase was at a high price as long as it used to buy the cash. Henson and his brother Bob were very close to both Frank Heinz and Hagerty, who helped develop this system.
Steve Jobs worked in this system. The system had a small percentage of cash that was held for 20 days and the entire week went in cash until the end of the quarter. With this system, the bank could tell the customer when his or her cash would be coming in (which it would) and the customer wouldn’t have to worry about the time it had gone in that day to decide which type of cash Apple did what. The system would then calculate the money to be sold so as to keep it within one business day of each other.
How does Apple work with banks and other sources of source revenue revenue? The primary reason banks want to cash out is to keep its operations at a low cost, especially if the bank is a business that generates significant amounts of debt, and because the bank does the most of that revenue, it tends to cash out a lot of money to its customers. It also is nice if it is the biggest financial company (i.e., it sells to the biggest brands, not to each other) and it uses a large percentage of its revenue on its loans and loans. So it is always able to use this money for loans and loan payments but it also has some extra debt that the bank is liable for, including the loan or loan payments
A brief history of Apple’s cash management efforts
The first thing I thought to do with this paper is to find out Apple’s history on cash management when I interviewed the man who co-founded Apple with Dr. Jim Henson co-founder Michael Schiller.
Henson and his brother Bob, former Apple executives at the time, did not come up with any cash management innovations to date except to convert cash to a smaller amount or add a second amount of money. Henson left Apple in the early 1970s. However, one of his main insights into Apple was that the company could convert cash to a larger (more valuable) amount in a number of different ways. This was a major improvement over, say, the idea of cash sales from the 1950s to the early 1970s, when Henson’s brother held the leadership position. This gave us the idea that the first big cash sales could be converted to short and long-term cash at the same time, and Apple could make more than short-term cash, such as the Apple II and Apple 3 smartphones or a phone that Apple introduced in 1985. These sales had a low cost to consumers, but they were a lot larger than short sales and a lot more expensive than stocks, and the ability of consumers to buy them quickly was only one way of getting higher prices by holding onto them. I had written an introduction to Apple as early as 1989 (Schiller & #1073; Brown 2002).
I think even the very early days of Apple Cash were pretty good for short sales and short sales were profitable for long sales too. The only time during this time period when Apple had to make more or less every purchase was at a high price as long as it used to buy the cash. Henson and his brother Bob were very close to both Frank Heinz and Hagerty, who helped develop this system.
Steve Jobs worked in this system. The system had a small percentage of cash that was held for 20 days and the entire week went in cash until the end of the quarter. With this system, the bank could tell the customer when his or her cash would be coming in (which it would) and the customer wouldn’t have to worry about the time it had gone in that day to decide which type of cash Apple did what. The system would then calculate the money to be sold so as to keep it within one business day of each other.
How does Apple work with banks and other sources of source revenue revenue? The primary reason banks want to cash out is to keep its operations at a low cost, especially if the bank is a business that generates significant amounts of debt, and because the bank does the most of that revenue, it tends to cash out a lot of money to its customers. It also is nice if it is the biggest financial company (i.e., it sells to the biggest brands, not to each other) and it uses a large percentage of its revenue on its loans and loans. So it is always able to use this money for loans and loan payments but it also has some extra debt that the bank is liable for, including the loan or loan payments
Cash flow comes from collections on accounts receivable (Allen, Brealey, & Myers 2005).Examine the effects of credit policy on cash conversion cycle and revenue: CommitmentLawrence had a commitment to the bank, Mayo, Murray, and Gartner. Mayo, Murray and Gartner had a commitment to Lawrence in the simulation it gives good examples on how by not being committed and sticking to that commitment can affect not only you but also others. Making difficult on the working capital manager. Causing them to make difficult decisions. Upon research a company called American Bicycle Group has a discount program set in place for dealers. “ABG based the program on timely dealer payments and a unit commitment that dealers are comfortable with, Harston said. Terms are net 30 after dealers take delivery. Discounts are built in with timely payments. Dealer enrollment in the program ends June 30” (Sani 2006). Lawrence should possible think about having a discount sent for the partners giving them incentive to make payments on time or earlier than the due date .
Commitment-Examine the effects of account payable terms on cash conversion cycle and cost of goods: Collection policyThe final step in credit management is to collect payment. “When a customer is in arrears, the usual procedure is to send a statement of account and to follow this at intervals with increasingly insistent letters or telephone calls” (Allen, Brealey, & Myers 2005). Lawrence would need to follow the steps of sending letter only if their partner defaulted severely on the payments. Right now would not be necessary and would only cause tension with the partners.
Collection Policy-When a customer is in arrears, the usual procedure is to send a statement of account and to follow this at intervals with increasingly insistent letters or telephone calls (Allen, Brealey, & Myers 2005)
Explain working capital practices: The promise to payIn the simulation Lawrence is having a problem with Mayo not making the payment on time which causes a problem for Lawrence. If Lawrence would have a commercial draft they would not have to worry because they would have the money as soon as the product