Sears Holding Corporation – Using brand names to create
Sears Holding Corporation (SHC) parent of Kmart and Sears, Roebuck and Co.
Current Assets and Current Liabilities • Current assets -- short-term resources – – – –
Cash Investments Accounts receivable Inventory
• Current liabilities -- short-term debts – – – –
Accounts payable Accrued salaries Accrued taxes Short-term bank loans
Working capital management – managing of short-term assets and liabilities.
Transaction balances – cash kept on hand by a firm to pay normal daily expenses such as employee wages and bills for supplies utilities. 16-7
Lockbox – an address, usually a commercial bank, at which a company receives payments in order to speed collections from customers. 16-8
Going Green or Greenwashing?
Eco Chic line – products made with organic materials. The Pottery Barn collection.
Marketable securities – temporary investment of extra cash by organizations up to one year in U.S. Treasury bills, certificates of deposit, commercial paper, or Eurodollar. 16-10
Managing Cash Treasury bills– short-term debt obligations the U.S. government sells to raise money. Commercial certificates of deposit (CD’s) – issued by commercial banks and brokerages available in minimum amounts of $100,000 and can be traded prior to maturity Commercial paper – a written promise from one company to another to pay a specific amount of money 16-11
Managing Cash Type of Security
Seller of Security
Interest Rate 5/23/08
U.S. commercial banks
U.S. commercial banks
European commercial banks
Short-term Investment Possibilities for Idle Cash 16-12
Eurodollar market – a market created in London for trading U.S. dollars in foreign countries.
Accounts Receivable – money owed to a business by credit customers.
Optimizing inventory – minimize firm’s investment in inventory without experiencing production cutbacks.
Maximizing Current Liabilities
Accounts payable – money an organization owes to suppliers for goods and services. Trade credit – credit extended by suppliers for the purchase of their goods and services 16-16
Line of Credit -- An arrangement by which a bank agrees to lend a specified amount of money to an organization upon request Secured Loans -- Loans backed by collateral that the bank can claim if the borrowers do not repay the debt
Unsecured loan – loans backed only by the borrower’s good reputation and previous credit rating Prime rate – the interest rate that commercial banks charge their best customers for short term loans
Non-Bank Liabilities •
Short-term loans from insurance companies, pension funds, money market funds, or finance companies
– Purchases accounts receivable at a discount •
Taxes and employees’ wages
Managing Fixed Assets
Long-term (fixed) assets – production facilities (plants), offices, and equipment—all of which are expected to last for many years.