This document provides an introduction to managerial finance. It defines key terms related to business organizations like sole proprietorships, partnerships, and corporations. It explains that managerial finance concerns the duties of financial managers in businesses. Financial managers are responsible for maximizing shareholder wealth by making decisions that consider return and risk. The goals of the document are to explain the differences between finance and accounting, introduce various types of financial managers and their roles, and discuss corporate governance and addressing principal-agent problems between managers and shareholders.
This document provides an introduction to managerial finance. It defines key terms related to business organizations like sole proprietorships, partnerships, and corporations. It explains that managerial finance concerns the duties of financial managers in businesses. Financial managers are responsible for maximizing shareholder wealth by making decisions that consider return and risk. The goals of the document are to explain the differences between finance and accounting, introduce various types of financial managers and their roles, and discuss corporate governance and addressing principal-agent problems between managers and shareholders.
This document provides an introduction to managerial finance. It defines key terms related to business organizations like sole proprietorships, partnerships, and corporations. It explains that managerial finance concerns the duties of financial managers in businesses. Financial managers are responsible for maximizing shareholder wealth by making decisions that consider return and risk. The goals of the document are to explain the differences between finance and accounting, introduce various types of financial managers and their roles, and discuss corporate governance and addressing principal-agent problems between managers and shareholders.
This document provides an introduction to managerial finance. It defines key terms related to business organizations like sole proprietorships, partnerships, and corporations. It explains that managerial finance concerns the duties of financial managers in businesses. Financial managers are responsible for maximizing shareholder wealth by making decisions that consider return and risk. The goals of the document are to explain the differences between finance and accounting, introduce various types of financial managers and their roles, and discuss corporate governance and addressing principal-agent problems between managers and shareholders.
Download as DOCX, PDF, TXT or read online from Scribd
Download as docx, pdf, or txt
You are on page 1of 7
At a glance
Powered by AI
The key takeaways are the different types of business ownership structures such as sole proprietorship, partnership, and corporation as well as important financial planning concepts such as cash budgeting.
The main types of business ownership structures discussed are sole proprietorship, partnership, and corporation.
The main components of a cash budget are cash receipts, cash disbursements, net cash flow, ending cash, required total financing, and excess cash balance.
INTRODUCTION TO MANAGERIAL FINANCE
Finance is the science and art of managing money.
Financial Services is the area of finance concerned with the design and delivery of advice and financial products to individuals, business, and governments. Managerial Finance concerns the duties of financial manager in a business. Financial Managers administer the financial affairs of all types of business private and public, large and small, profit seeking and not for profit. Sole Proprietorship is a business owned by one person and operated for his or own profit. Strengths: owner receives all profits (loss), low organizational costs, income included and taxed on proprietors personal tax return, independence, secrecy, and ease of dissolution. Weaknesses: unlimited liability, limited fund-raising power, lacks continuity when proprietor dies. Unlimited Liability, creditors can make claims against the owners personal assets to recover debts owed by the business. Partnership is a business owned by two or more people and operated for profit. Strengths: can raise more funds, enhanced borrowing power, more available brain power and managerial skill, income included and taxed on partners personal tax. Weaknesses: unlimited liability (regular partnership), partnership is dissolved when a partner dies and difficult to liquidate or transfer partnership. An article of Partnership is a written contract used to formally establish a business partnership. Corporation is an entity created by law. Strengths: limited liability, ownership is readily transferable, long life of firm, and better access of financing. Weaknesses: taxes generally higher, more expensive to organize, subject to greater government regulation, and lacks secrecy (disclosure). Stockholders are the owners of a corporation, whose ownership, or equity, takes the form of either common stock or preferred stock. Limited Liability is a legal provision that limits stockholders liability for a corporations debt to the amount they initially invested in the firm by purchasing stock. Common Stock is the purest and most basic form of corporate ownership. Dividends are periodic distributions of cash to the stockholders of a firm. Board of Directors is a group elected by the firms stockholders and typically responsible for approving strategic goals and plans, setting general policy, guiding corporate affairs, and approving major expenditures. President or Chief Executive Officer (CEO) is the corporate official responsible for managing the firms day-to-day operations and carrying out policies established by the Board of Directors. Financial Analyst prepares the firms financial plans and budgets. Capital Expenditure Manager evaluates and recommends proposed long-term investments. Project Finance Manager arranges financing for approved long- term investments. Cash Manager maintains and controls the firms daily cash balances. Credit Analyst/Manager administers the firms credit policy by evaluating credit applications, extending credit, and monitoring and collecting accounts receivables. Pension Fund Manager oversees or manages the assets and liabilities of the employees pension fund. Foreign Exchange Manager manages specific foreign operations and the firms exposure to fluctuations in exchange rates. Maximizing the Wealth of the Shareholders is the goal of the firm, and also of managers. Share price is the simplest and best measure of stockholder wealth. To enrich shareholders, managers must first satisfy the demands of other interest groups such as customers, employees, or suppliers. The key variables that managers must consider when making business decisions are return (Cash flows) and risk. These are the key determinants of share price. Earnings per Share represent the amount earned during the period on behalf of each outstanding share of common stock. Profit Maximization: Timing is important, Cash flow is a straightforward measure of the money flowing into and out of the company, and Risk matters a great deal. Timing, the receipt of funds sooner rather than later is preferred. Cash Flows, only when earnings increases are accompanied by increased future cash flows is a higher stock price expected. Risk is the chance that actual outcomes may differ from those expected. Risk Averse, requiring compensation to bear risk. In other words, investors expect to earn higher returns on riskier investments, and they will accept lower returns on relatively safe investments. Stakeholders are groups such as employees, customers, suppliers, creditors, owners, and others who have a direct economic link to the firm. Business Ethics are the standards of conduct or moral judgment that apply to persons engaged in commerce. Ethical behavior is viewed as necessary for achieving the firms goal of owner wealth maximization. Treasurer (CFM) typically manages the firms cash, oversees its pension plans, and manages key risks. Controller (CFA) is responsible for the firms accounting activities, such as corporate accounting, tax management, financial accounting, and cost accounting. The Treasurers focus tends to be more external, whereas the Controllers focus is more internal. Foreign Exchange Manager is responsible for managing and monitoring the firms exposure to loss from currency fluctuations. The primary economic principle used in managerial finance is Marginal Cost-Benefit Analysis which states that financial decisions should be made and actions taken only when the added benefits exceed the added costs. (Prob. Solving) There are two basic differences between finance and accounting; one is related to the emphasis on cash flows and the other to decision making. Accrual Basis recognizes revenue at the time of sale and recognizes expenses when they are incurred. The financial manager places emphasis on cash flows, the intake and outgo of cash. The financial manager uses Cash Basis which recognizes revenues and expenses only with respect to actual inflows and outflows of cash. (Prob. Solving) The second major difference between finance and accounting has to do with Decision Making. Financial Managers make decisions bases on their impact on the value of the firm, not on accounting principles used to construct a balance sheet. (Prob. Solving) Investment Decisions: current assets and fixed assets. Financing Decisions: current liabilities and long-term funds. Managers are entrusted to only take actions or make decisions that are in the best interests of the firms owners, its shareholders. Corporate Governance refers to the rules, processes, and laws by which companies are operated, controlled, and regulated. A well-defined corporate governance structure is intended to benefit all corporate stakeholders by ensuring that the firm is run in a lawful and ethical fashion, in accordance with best practices, and subjects to all corporate regulations. Individual Investors own relatively small quantities of shares and as a result do not typically have sufficient means to directly influence a firms corporate governance. In order to influence the firm, individual investors often find it necessary to act as a group by voting collectively on corporate matters. Institutional Investors are investment professionals that are paid to manage and hold large quantities of securities on behalf of individuals, businesses, and governments. Institutional Investors often directly influence a firms corporate governance by exerting pressure on management to perform or communicating their concerns to the firms board. Government Regulation generally shapes the corporate governance of all firms. Two main types if issues (1) false disclosures and (2) undisclosed conflicts of interests. Sarbanes-Oxley Act of 2002 (SOX) is an act aimed at eliminating corporate disclosure and conflict of interest problems. Contains provisions about corporate financial disclosures and the relationships among corporations, analysts, auditors, attorneys, directors, officers, and shareholders. Managers can be viewed as the Agents of the firms shareholders. Principal-Agent Relationship is an arrangement in which an agent acts on the behalf of a principal, where the shareholders are the principals. Agency Problem arises when managers place personal goals ahead of the goals of shareholders. These problems in turn give rise to agency costs. Agency Costs are costs borne by shareholders due to the presence or avoidance of agency problems, and in either case represent a loss of shareholder wealth. Incentive Plans is a management compensation plan that ties management compensation to share price; granting of stock options. Stock Options are options extended by the firm that allow management to benefit from increases in stock prices over time. Performance Plans is a plan that ties management compensation to measures such as EPS. Performance shares and/or cash bonuses are used as compensation under these plans. Performance Shared are shares of stock given to management for meeting stated performance goals. Cash Bonuses are cash payments tied to the achievement of certain performance goals. When a firms internal corporate governance is unable to keep agency problems in check, it is likely that rival managers will try to gain control of the firm. The constant Threat of Takeover tends to motivate management to act in the best interest of the firms owners. Much of the evidence suggests that Share Price Maximization the focus of this book is the primary goal of most firms.
THE FINANCIAL MARKET ENVIRONMENT Firms can obtain funds from external sources. The first source is through a financial institution. A second source is through financial markets. A third source is through private placement. Financial Institution serves as an intermediary that channels the savings of individuals, businesses, and governments into loans or investments. This includes banks, life insurance, mutual funds, and pension. Individuals as a group are the Net Suppliers for financial institutions: They save more money than they borrow. Firms are Net Demanders of funds: They borrow more money than they save. The government, like business firms, is typically a Net Demander of funds: It typically borrows more than it saves. Commercial Banks are institutions that provide savers with a secure place to invest their funds and that offer loans to individual and business borrowers. Investment Banks are institutions that assist companies in raising capital, advice firms on major transactions such as mergers or financial restructurings, and engage in trading and market making activities. Glass-Steagall Act is an act of Congress in 1933 that separates the activities of commercial and investment banks. Shadow Banking System are group of institutions that engage in lending activities, much like traditional banks, but do not accept deposits and therefore are not subject to the same regulations as traditional banks. Financial Markets are forums in which suppliers of funds and demanders of funds can transact directly. Private Placement involves the sale of a new security directly to an investor or group of investors. Public Offering is the sale of either bonds or stocks to the general market. Primary Market is a financial market in which securities are initially issued; the only market in which the issuer is directly involved in the transaction. Secondary Market is a financial market in which pre-owned securities are traded. Money Market is a financial relationship created between suppliers and demanders of short-term funds (short-term debt instruments or marketable securities). Marketable Securities are short term debt instruments, such as treasury bills, commercial paper, and negotiable certificates of deposit issued by the government, business, and financial institutions, respectively. Eurocurrency Market is the international equivalent of the domestic money market. It arises when a firm or individual makes a bank deposit in a currency other than the local currency of the country where the bank is located. Capital Market is a market that enables suppliers and demanders of long-term funds (bonds and stocks) make transactions. Bond is a long-term debt instrument used by business and government to raise large sums of money, generally from a diverse group of lenders. Preferred Stock is a special form of ownership having a fixed periodic dividend that must be paid prior to payment of any dividends to common stockholders. Broker Market, the securities exchanges on which the two sides of a transaction, the buyer and seller, are brought together to trade securities. Securities Exchanges are organizations that provide the marketplace in which firms can raise funds through the sale of new securities and purchasers can resell securities. Dealer Market is the market in which the buyer and seller are not brought together directly but instead have their orders executed by security dealers that make markets in the given security. Market Makers are security dealers who make markets by offering to buy or sell certain securities at stated price. Nasdaq Market is an all-electronic trading platform used to execute securities trades. Over-The-Counter Market (OTC) is where smaller, unlisted securities are traded. Bid Price is the highest price offered to purchase a security. Ask Price is the lowest price at which a security is offered for sale.
FINANCIAL STATEMENTS AND RATIO ANALYSIS Generally Accepted Accounting Principles (GAAP) is the practice and procedure guidelines used to prepare and maintain financial records and reports; authorized by FASB. Financial Accounting Standards Board (FASB) is the accounting professions rule-setting body, which authorizes GAAP. Public Company Accounting Oversight Board (PCAOB) is a not- for-profit corporation established by the Sarbanes-Oxley Act of 2002. Stockholders Report is an annual report that publicly owned corporations must provide to stockholders; it summarizes and documents the firms financial activities during the past year. Letter to Stockholders is the first element of the annual stockholders report and the primary communication from managements. It describes the events that are considered to have had the greatest effect on the firm. The four key financial statements: (1) Statement of Comprehensive Income, (2) Statement of Financial Position, (3) Statement of Changes in Equity, and (4) Statement of Cash Flows + (5) Notes to Financial Statement. Income Statement provides a financial summary of the firms operating results (financial performance) during a specified period. Dividends Per Share (DPS) is the dollar amount of cash distributed during the period on behalf of each outstanding share of common stock. Balance Sheet is a summary statement of the firms financial position (stability and liquidity/solvency) at a given point in time. Current Assets are short-term assets, expected to be converted into cash within one year or less. Current Liabilities are short-term liabilities, expected to be paid within one year or less. Long-Term Debt is debts which payment is not due in the current year. Paid-in Capital in Excess of Par is the amount of proceeds in excess of the par value received from the original sale of common stock. Retained Earnings represent the cumulative total of all earnings, net of dividends, which have been retained and reinvested in the firm since its inceptions. Statement of Stockholders Equity shows all equity account transactions that occurred during a given year. Statement of Retained Earnings reconciles the net income earned during the year and any cash dividends paid, with the change in retained earnings between the starts and the end of that year. An abbreviated form of the Statement of Stockholders Equity. Statement of Cash Flows provides a summary of the firms operating, investing, and financing cash flows and reconciles them with changes in its cash and marketable securities during the period (how cash is generated and spent). Notes to the Financial Statements provide explanatory notes keyed to relevant accounts in the statements; they provide detailed information on the accounting policies, procedures, calculations, and transactions underlying entries in the financial statements. Ratio Analysis involves methods of calculating and interpreting financial ratios to analyze and monitor the firms performance. Cross-Sectional Analysis is a comparison of different firms financial ratios at the same point in time; involves comparing the firms ratios to those of other firms in its industry of to industry averages. Benchmarking is a type of cross-sectional analysis in which the firms ratio values are compared to those of a key competitor or group of competitors that it wishes to emulate. Time Series Analysis evaluates financial performance over time using financial ratio analysis. Comparison of current to past performance. Combined Analysis is the most informative approach to ratio analysis combines cross-sectional and time-series analyses. It assesses the trend in the behavior of the ratio in relation to the trend for the industry. Liquidity of a firm is measured by its ability to satisfy its short- term obligations as they come due. Current Ratio is a measure of liquidity calculated by dividing the firms current assets by its current liabilities. Quick (Acid-Test) Ratio is a measure of liquidity calculated by dividing the firms current assets minus inventory by its current liabilities. Activity Ratios measures the speed with which various accounts are converted into sales or cash inflows or outflows. Inventory Turnover measures the activity, or liquidity, of a firms inventory. (COGS/Ave. Inv.) Average Age of Inventory is the average number of days sales in inventory. (365/Inv. Turnover) or (Ave. Inv./(COGS/365)) Account Receivable Turnover (NS/Ave. AR) Average Collection Period is the average amount of time needed to collect accounts receivable. (Ave. AR/(NS/365)) Average Payment Period is the average amount of time needed to pay accounts payable. (AP/(Purch./365)) Total Asset Turnover indicated the efficiency with which the firm uses its assets to generate sales. (NS/Ave. TA) Debt Position of a firm indicates the amount of other peoples money being used to generate profits. Financial Leverage is the magnification of risk and return through the use of fixed-cost financing, such as debt and preferred stock. Degree of Indebtedness measures the amount of debt relative to other significant balance sheet amounts. Ability to Service Debts is the ability of a firm to make the payments required on a scheduled basis over the life of a debt. To Service Debts simply means to pay debts on time. Coverage Ratios is the firms ability to pay certain fixed charges. Debt Ratio measures the proportion of total assets financed by the firms creditors. (TL/TA) Times Interest Earned Ratio measures the firms ability to make contractual interest payments; sometimes called the interest coverage ratio. (EBIT/IE) Common-Size Income Statement (Vertical) is an income statement in which each item is expressed as a percentage of sales Gross Profit Margin measures the percentage of each sales dollar remaining after the firm has paid for its goods. (GP/NS) Operating Profit Margin measures the percentage of each sales dollar remaining after all costs and expenses other than interests, taxes, and preferred stock dividends are deducted; the pure profits earned on each sales dollar. (OP/NS) Net Profit Margin measures the percentage of each sales dollar remaining after all costs, expenses, including interests, taxes, and preferred stock dividends, have been deducted. (NP/NS) Earnings Per Share (EPS) is generally of interest to present or prospective stockholders and management. (NI-Preferred Stock/Number of CS outstanding shares) Dividend Per Share (DPS) is the amount of cash actually distributed to each shareholder. Return on Total Assets (ROA) measures the overall effectiveness of management in generating profits with its available assets; also called the Return On Investment (ROI). (NI /TA) Return on Common Equity measures the return earned on the common stockholders investment in the firm. (NI-Pref. Stock /Total Common Stock Equity) Market Ratios relates a firms market value, as measured by its current share prices, to certain accounting values. Price Earnings Ratio (P/E) measures the amount that investors are willing to pay for each dollar of a firms earnings; the higher the P/E ratio, the greater the investor confidence. (MPS/EPS) Market/Book Ratio (M/B) provides an assessment of how investors view the firms performance. (MPS/BV) Book Value per share of Common Stock (CS Equity/Sh. Of CS Out.)
TIME VALUE OF MONEY Time Value of Money refers to the observation that it is better to receive money sooner than later. A dollar today is worth more than a dollar in the future. Time Line is a horizontal line on which time zero appears at the leftmost end and future periods are marked from left to right; can be use to depict investment cash flows. The future value technique uses Compounding to find the future value of each cash flow at the end of the investments life. Alternatively, the present value technique uses Discounting to find the present value of each cash flow at time zero. Single Amount is lump-sum amount either currently held or expected at some future date. Future Value of a Single Amount is the value given at a future date of an amount placed on deposit today and earning interest at a specified rate. (FV=PV x (1+r)^n) Compound Interest is the interest that is earned on a given deposit and has become part of the principal at the end of a specified period. Principal is the amount of money on which interest is paid. The higher the interest rate, the higher the future value. The longer the period of time, the higher the future value. Present Value of a Single Amount is the current dollar value of a future amount the amount of money that would have to be invested today at a given interest rate over a specified period to equal the future amount. (PV=FV / (1+r)^n) Discounting Cash Flows is the process of finding present values; the inverse of compounding interest. The higher the discount rate, the lower the present value. The longer the period of time, the lower the present value. Annuity is a level of equal periodic stream of cash flows over a specified time period. Ordinary Annuity is an annuity for which the cash flow occurs at the end of each period. Future Value of an Ordinary Annuity (FV=CF x ((((1+r)^n)-1)/r)) Present Value of an Ordinary Annuity (PV=(CF/r) x (1- ((1)/(1+r)^n))) Annuity Due is an annuity for which the cash flow occurs at the beginning of each period. Future Value of an Annuity Due (FV of OA x (1+r)) The future value of an annuity due is always greater than the future value of an otherwise identical ordinary annuity. Present Value of an Annuity Due (PV of OA x (1+r)) Perpetuity is an annuity with an infinite life, providing continual annual cash flow. (PV=CF / r) Mixed Stream a stream of cash flow that is not an annuity; a stream of unequal periodic cash flows that reflect no particular pattern. If PV, ex. 5 years (raise to 1, 2, 3, 4, 5) If FV, ex. 5 years (raise to 4, 3, 2, 1)
Semiannual Compounding (2) involves compounding of interest over two periods within the year. Quarterly Compounding (4) involves compounding of interest over four periods within the year. The more frequently interest is compounded, the greater the amount of money accumulated. Continuous Compounding involves compounding of interest in an infinite number of times per year at intervals of microseconds. (FV=PV x (e^(r x n))) Nominal (Stated) Annual Rate is the contractual annual rate of interest charged by a lender or promised by a borrower. Effective (True) Annual Rate (EAR) is the annual rate of interest actually paid or earned. (EAR=(1+((r/m)^m))-1) Determining deposits needed to accumulate a future sum end-of-year deposits. (CF=FV / ((((1+r)^n)-1)/r)) Loan Amortization is the determination of the equal periodic loan payments necessary to provide a lender with a specified interest return and to repay the loan principal over a specified period. Loan Amortization Schedule is a schedule of equal payments to repay a loan equal end-of-year payments. (CF=(PV x R) / (1- ((1)/(1+r)^n))) Finding interest or growth rates (r=((FV/PV)^(1/n))-1) Finding an unknown number of periods (n=(log(FV/PV))/(log(1+r)))
CASH FLOW AND FINANCIAL PLANNING Depreciation is a portion of the costs of fixed assets charged against annual revenues over time. Modified Accelerated Cost Recovery System (MACRS) is a system used to determine the depreciation of assets for tax purposes. Under MACRS, the depreciable value of an asset is its full cost, including outlays for installation. Depreciable Life of an Asset is the time period over which an asset is depreciated. Recovery Period is the appropriate depreciable life of a particular asset as determined by MACRS. Statement of Cash Flows summarizes the firms cash flow over a given period. Operating Flows are cash flows directly related to sale and production of the firms products and services. Investment Flows are cash flows associated with purchase and sale of both fixed assets and equity investments in other firms. Financing Flows are cash flows that result from debt and equity financing transactions; include incurrence and repayment of debt, cash inflow from the sale of stock, and cash outflow to repurchase stock or pay dividends. Noncash Charge is an expense that is deducted on the income statement but does not involve the actual outlay of cash during the period; includes depreciation, amortization, and depletion. The statement of cash flows allows the financial manager and other interested parties to analyze the firms cash flows. Operating Cash Flow (OCF) is the cash flow a firm generates from its normal operations. (OCF=NOPAT + Depreciation) Net Operating Profits after Taxes (NOPAT) is a firms earnings before interest and after taxes. (NOPAT=EBIT x (1-T)) Free Cash Flow (FCF) is the amount cash flow available to investors (creditors and owners) after the firm has met all operating needs and paid for investments in net fixed assets and net current assets. (FCF=OCF NFAI NCAI) Net Fixed Asset Investment (NFAI=Change in net FA + Depn) Net Current Asset Investment (NCAI=Change in net CA (Change in (AP + Accruals))) Financial Planning Process begins with long-term, strategic, financial plans that in turn guide the formulation of short- term, or operating, plans and budgets. Two key aspects of the financial planning process are cash planning and profit planning. Long-term (strategic) Financial Plans lay out a companys planned financial actions and the anticipated impact of those actions over periods ranging from 2 to 10 years. Generally, firms that are subject to high degrees of operating uncertainty, relatively short production cycles, or both, tend to use shorter planning horizon. Short-term (operating) Financial Plans specify short-term financial actions and the anticipated impact of those actions over periods ranging from 1 to 2 years. Key inputs of short-term financial plans include sales forecasts and various forms of operating and financial data. Key outputs of short-term financial plans include a number of operating budgets, the cash budget, and pro forma financial statements. Cash Budget (cash forecast) is a statement of the firms planned inflows and outflows of cash that is used to estimate its short-term cash requirements. Cash budget is designed to cover a 1-year period, divided into smaller time intervals. The more seasonal and uncertain a firms cash flows, the greater the number of intervals. Sales Forecast is the prediction of the firms sales over a given period based on external and/or internal data; used as the key input to the short-term financial planning process. External Forecast is a sales forecast based on the relationships observed between the firms sales and certain key external economic indicators. Internal Forecast is a sales forecast based on a buildup, or consensus, of sales forecasts through the firms own sales channels. Cash Receipts include all of a firms inflow of cash during a given financial period. The most common component of cash receipts are cash sales, collection of accounts receivable, and other cash receipts. Cash Disbursements include all outlays of cash by the firm during a given financial period. It is important to recognize that Depreciation and other noncash charges are NOT included in the cash budget. Net Cash Flow is the mathematical difference between the firms cash receipts and its cash disbursements in each period. Ending Cash is the sum of the firms beginning cash and its net cash flow for the period. Required Total Financing is the amount funds needed by the firm if the ending cash for the period is less than the desired minimum cash balance; typically represented by notes payable. Excess Cash Balance is the excess amount available for investment by the firm if the periods ending cash is greater than the desired minimum cash balance; assumed to be invested in marketable securities. There are two ways of coping with uncertainty in the cash budget: (1) scenario analysis or what if approach and (2) simulation. Scenario Analysis or what if approach is based on pessimistic, most likely, and optimistic forecast. The information provided by the cash budget is NOT necessarily adequate for ensuring solvency. Effective cash planning requires a look beyond the cash budget.