1. Current assets management: value based working capital decisions CURRENT ASSETS MANAGEMENT: VALUE BASED WORKING CAPITAL DECISIONS (5/6) 18 th November 2009 @ 4pm

2. Current assets management: value based working capital decisions 2 CURRENT ASSETS MANAGEMENT: VALUE BASED WORKING CAPITAL DECISIONS E-mail: GRZEGORZ.MICHALSKI@UE.WROC.PLGRZEGORZ.MICHALSKI@UE.WROC.PL www: HTTP://MICHALSKIG.UE.WROC.PL/HTTP://MICHALSKIG.UE.WROC.PL/ ph.: 0048503452860 Next lecture (exam): 25 th November 2009.

3. Current assets management: value based working capital decisions Example 5: D/(D+E) = 40%. Alternative Net Working Capital management policies/strategies: Aggressive-Restrictive (A-R) with Cost of Equity rate = 42%, cost of long-term Debt rate = 18%, cost of short-term Debt rate = 14%, share of long-term debt in total debt = 30%, fixed assets = 2000, EBIT = 60% of CR, CR = 10000, current assets = 25% of CR, Accounts Payable = 40% of current assets. Aggressive-Flexible (A-F) with Cost of Equity rate = 36%, cost of long-term Debt rate = 16%, cost of short- term Debt rate = 12%, share of long-term debt in total debt = 30%, fixed assets = 4000, EBIT = 50% of CR, CR = 20000, current assets = 45% of CR, Accounts Payable = 45% of current assets. Conservative-Restrictive (C-R) with Cost of Equity rate = 31%, cost of long-term Debt rate = 14%, cost of short-term Debt rate = 10%, share of long-term debt in total debt = 90%, fixed assets = 2000, EBIT = 60% of CR, CR = 10000, current assets = 25% of CR, Accounts Payable = 50% of current assets. Conservative-Flexible (C-F) with Cost of Equity rate = 26%, cost of long-term Debt rate = 12%, cost of short-term Debt rate = 8%, share of long-term debt in total debt = 90%, fixed assets = 4000, EBIT = 50% of CR, CR = 20000, current assets = 45% of CR, Accounts Payable = 55% of current assets.

4. Current assets management: value based working capital decisions

6. Exam-like: Example 5b*: D/(D+E) = 44%. Alternative Net Working Capital management policies/strategies: Aggressive-Restrictive (A-R) with Cost of Equity rate = 44%, cost of long-term Debt rate = 19%, cost of short-term Debt rate = 15%, share of long-term debt in total debt = 32%, fixed assets = 3000, EBIT = 80% of CR, CR = 8000, current assets = 30% of CR, Accounts Payable = 30% of current assets. Aggressive-Flexible (A-F) with Cost of Equity rate = 40%, cost of long-term Debt rate = 17%, cost of short-term Debt rate = 13%, share of long-term debt in total debt = 32%, fixed assets = 6500, EBIT = 60% of CR, CR = 19000, current assets = 60% of CR, Accounts Payable = 44% of current assets. Conservative-Restrictive (C-R) with Cost of Equity rate = 36%, cost of long-term Debt rate = 15%, cost of short-term Debt rate = 11%, share of long-term debt in total debt = 95%, fixed assets = 3000, EBIT = 80% of CR, CR = 8000, current assets = 30% of CR, Accounts Payable = 51% of current assets. Conservative-Flexible (C-F) with Cost of Equity rate = 29%, cost of long-term Debt rate = 13%, cost of short-term Debt rate = 9%, share of long-term debt in total debt = 95%, fixed assets = 6500, EBIT = 60% of CR, CR = 19000, current assets = 60% of CR, Accounts Payable = 65% of current assets.

7. Current assets management: value based working capital decisions

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11. Current assets management: value based working capital decisions 11 Alternative Asset Financing Policies Working Capital [WC] & WC financing

12. Current assets management: value based working capital decisions 12 Working Capital [WC] & WC financing Alternative Asset Financing Policies

13. Current assets management: value based working capital decisions 13 Working Capital [WC] & WC financing Alternative Asset Financing Policies