tailieunhanh - Ebook Financial management Brigham (13th edition): Part 2

(BQ) Part 2 book "Financial management Brigham" hass contents: Working capital management, multinational financial management, lease financing, initial public offerings, investment banking, and financial restructuring, derivatives and risk management, analysis of capital structure theory,.and other contents. | PART 7 Managing Global Operations Chapter 16 Working Capital Management Chapter 17 Multinational Financial Management 639 This page intentionally left blank CHAPTER 16 Working Capital Management W hat do . Airways, Apple Computer, Clorox, Kellogg, Dow Chemical, and Family Dollar Stores have in common? Each led its industry in the latest CFO Magazine annual survey of working capital management, which covered the 1,000 largest . publicly traded firms. Each company is rated on its “days of working capital,” which is the amount of net operating working capital required per dollar of daily sales: Receivables þ Inventory − Payables Days of ¼ working capital ðDWCÞ Average daily sales The average . firm’s DWC was 51 days, and the range was from a low of −154 for CIGNA, a health care provider that collects premiums in advance of payouts, to +475 for Toll Brothers, a homebuilder with a huge inventory of unsold houses. Tiffany, the jeweler, had a ratio of 207 due to its policy of extending credit to boost sales, while Apple achieved a ratio of −29 largely by making Internet sales and being paid by credit cards well in advance of shipping products and paying its suppliers. Variations across industries reflect different operating conditions, but there are also huge differences within industries. For example, the leader in the semiconductor sector, MEMC Electronic Materials, had an investment of only 21 days sales in working capital versus 111 days for another semiconductor firm, Novellus Systems. Ken Hannah, MEMC’s CFO, made this statement to CFO Magazine: “Every dollar we free up from working capital can be deployed back into the business.” He went on to say that MEMC managed to trim its working capital by 26 days, which released about $340 million. Assuming this money was used to repay debt that cost 6%, this would boost before-tax profits by $ million. How can a company lower its DWC? MEMC reduced its inventories by adopting just-in-time .