short term cheat sheet 
Solvent- when its assets exceeds its liabilitites
Liquid- when it can pay its bills on time without undue cost
Financially flexible- ability of a company to augment its future cf’s to cover cash needs and take advantage of unforeseen opportunities
Current Ratio and Quick Ratio are best characteristics of solvency
Current ratio- degree to which current liabilities are covered in event of liquidation
Basic ingredients of liquidity – Amount- Time- Cost
Lambda- is developed from a function of the likelihood that a firm will exhaust its liquid resources
SGR- is the sales growth rate that can be supported by the firms current/target financial policies
Financial statement approach- utilizes profitability analysis along with a balance sheet evaluation of what the effect of a course of action would have on the commpanys liquidity and cash position.
Valuation approach- Is the determination of the present dollar value of a series of cash flows.
The discount rate chosen in short-term financial decision making should always reflect the companys opportunity cost
Market manager- worries about finished-goods stock outs
Production manager- concerned with raw materials and WIP
Financial manager- main concern is total cost of capital tied up in inventory earning reasonable rate of return on invested capital
A simple way of altering an EOQ based inventory system to account for uncertainty is a safety stock
Re-order point – In EOQ model, inventory level at which an order should be placed JIT inventory- best suited for companys with larger size, stable demand and major market share
Credit policy includes: credit standards, credit investigation and correction, and credit terms
1)DIH=Inv/(COGS/365) = eff of inventory management- lower the better
2) DSO= A/R / (sales/365) eff of A/R or collection – quicker the better
3) DPO = A/P /(COGS or Purch/365)
4) Operating cycle = DSO + DIH
5) CC period = Operating cycle – DPO
- An increase in DSO, all else equal would
Liquid- when it can pay its bills on time without undue cost
Financially flexible- ability of a company to augment its future cf’s to cover cash needs and take advantage of unforeseen opportunities
Current Ratio and Quick Ratio are best characteristics of solvency
Current ratio- degree to which current liabilities are covered in event of liquidation
Basic ingredients of liquidity – Amount- Time- Cost
Lambda- is developed from a function of the likelihood that a firm will exhaust its liquid resources
SGR- is the sales growth rate that can be supported by the firms current/target financial policies
Financial statement approach- utilizes profitability analysis along with a balance sheet evaluation of what the effect of a course of action would have on the commpanys liquidity and cash position.
Valuation approach- Is the determination of the present dollar value of a series of cash flows.
The discount rate chosen in short-term financial decision making should always reflect the companys opportunity cost
Market manager- worries about finished-goods stock outs
Production manager- concerned with raw materials and WIP
Financial manager- main concern is total cost of capital tied up in inventory earning reasonable rate of return on invested capital
A simple way of altering an EOQ based inventory system to account for uncertainty is a safety stock
Re-order point – In EOQ model, inventory level at which an order should be placed JIT inventory- best suited for companys with larger size, stable demand and major market share
Credit policy includes: credit standards, credit investigation and correction, and credit terms
1)DIH=Inv/(COGS/365) = eff of inventory management- lower the better
2) DSO= A/R / (sales/365) eff of A/R or collection – quicker the better
3) DPO = A/P /(COGS or Purch/365)
4) Operating cycle = DSO + DIH
5) CC period = Operating cycle – DPO
- An increase in DSO, all else equal would