Session 12 Course Review and Exam Preparation Session

Session 12: Course Review and Exam Preparation

Session 12: Case Study, Review, Test, and Exam Preparation • Case Study or • Case Study Review and Classroom Practice Test • Questions on and review of entire course • Exam preparation steps v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Overview - 2

Case Study Introduction Toys v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. D·C Toys Session 12: Case Study - 3

Case Study: Exercise One Type % of Total Sales Average Collection Float Cash/debit card 21% 1 -2 days Checks 11% 4 -5 days VISTA 32% 2 -3 days US EXPRESS 22% 3 -4 days Toys credit card 14% 1 -2 days Type % of Vendor Payments Average Disbursement Float Net 30 credit terms 36% 5 days Net 45 credit terms 52% 5 days Net 60 credit terms 12% 5 days Type % of Payroll Average Disbursement Float Direct deposit 56% 0 days Payroll checks 44% 3 -4 days v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 4

Case Study: Exercise Two Toys D·C Toys Year 3 • Sales $11 b • Net earnings $494 m • 9 years ago: 522 stores • Now: 1, 454 stores Year 3 • Now: 1, 200 stores in U. S. • Plans to open new stores • $700 m revolver with $272 m used • Tax rate: 36% • WACC: 9% • 1, 013 in U. S. (rest in 27 countries) • Tax rate: 36% • WACC: 10% v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 5

Case Study: Exercise Three Disbursement systems • Centralized • Employees in every state and 26 countries • Local, national, and international vendors • Decentralized • Issue and reconcile local accounts at local level • Pay employees from bank in each state/country • Hybrid • Disburse locally, clear on centralized disbursement bank • Make use of ERP and automated treasury management Objectives • Disbursements made exactly as A/P requests • Needed funds are available • Payments risk/fraud is controlled v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 6

Case Study: Exercise Four In House Costs Batch Dollar Amount Days of Float Dollar-Days of Float 1 $4, 600, 002 2 $9, 200, 004 2 $1, 500, 331 5 $7, 501, 655 3 $3, 098, 000 6 $18, 588, 000 Totals $9, 198, 333 Average Daily Float Annual Cost of Float In-House Processing Costs $35, 289, 659 30 Days $35, 289, 659 $1, 176, 322 x 10% $117, 632 120, 000 checks per year x $0. 28 per check $33, 600 v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 7

Case Study: Exercise Five • Great holiday season: $950 m in cash • Determine how much needed • For “drought” season (next 9 months) • To invest for longer term (Cap. Ex) • Investment policy • +20% reserve in short-term accounts • Maturity matching • Only Prime-1, A-1+, or A-1 v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 8

Case Study: Exercise Six Before Netting (USD equivalents) 190 100 EMU Countries (euro, EUR) 100 60 90 40 Venezuela (bolivar fuerte, VEF) 90 U. S. A. (dollar, USD) 100 70 30 50 China (renminbi, RMB) 40 80 30 80 India (rupee, INR) Botswana (pula, BWP) v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 9

Case Study: Exercise Seven • Need international and multi-local banking relationships • Explore bank-provided information systems • Explore e-commerce, ASC X 12 financial transaction sets, and STP • Need some automated checks on account analysis statements • Determine risks of bank failure v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Case Study - 10

Classroom Practice Test (Optional) Intro to Treasury Management Working Capital Management Treasury Management Environment v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Financial Management Risk Management Session 12: Practice Test -

Course Review and Evaluation • Questions? • Suggestions for subjects to review? • Course evaluation v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Questions/Review - 12

Exam Preparation Steps • Retake the online post-test. • Memorize financial formulas using online formula flashcards. • Review the test-yourunderstanding questions at the end of each chapter. • Complete or review all Exam Practice (Describe and Differentiate) questions. • Review the online calculations. • Review online Test-Taking Tips. v 4. 0 © 2013 Association for Financial Professionals. All rights reserved. Session 12: Preparation Steps - 13