As above, the goal of Corporate Finance is the maximization of firm value. In the context of long term, capital investment decisions, firm value is enhanced through appropriately selecting and funding NPV positive investments. These investments, in turn, have implications in terms of cash flow and cost of capital.

The goal of Working capital management is therefore to ensure that the firm is able to operate, and that it has sufficient cash flow to service long term debt, and to satisfy both maturing short-term debt and upcoming operational expenses. In so doing, firm value is enhanced when, and if, the return on capital exceeds the cost of capital; See Economic value added (EVA).

Working capital is the amount of capital which is readily available to an organization. That is, working capital is the difference between resources in cash or readily convertible into cash (Current Assets), and cash requirements (Current Liabilities). As a result, the decisions relating to working capital are always current, i.e. short term, decisions.

In addition to time horizon, working capital decisions differ from capital investment decisions in terms of discounting and profitability considerations; they are also “reversible” to some extent. (Considerations as to Risk appetite and return targets remain identical, although some constraints – such as those imposed by loan covenants – may be more relevant here).

Working capital management decisions are therefore not taken on the same basis as long term decisions, and working capital management applies different criteria in decision making: the main considerations are (1) cash flow / liquidity and (2) profitability / return on capital (of which cash flow is probably the more important).

* The most widely used measure of cash flow is the net operating cycle, or cash conversion cycle. This represents the time difference between cash payment for raw materials and cash collection for sales. The cash conversion cycle indicates the firm’s ability to convert its resources into cash. Because this number effectively corresponds to the time that the firm’s cash is tied up in operations and unavailable for other activities, management generally aims at a low net count. (Another measure is gross operating cycle which is the same as net operating cycle except that it does not take into account the creditors deferral period.)

* In this context, the most useful measure of profitability is Return on capital (ROC). The result is shown as a percentage, determined by dividing relevant income for the 12 months by capital employed; Return on equity (ROE) shows this result for the firm’s shareholders. As above, firm value is enhanced when, and if, the return on capital, exceeds the cost of capital. ROC measures are therefore useful as a management tool, in that they link short-term policy with long-term decision making.

Management of working capital

Guided by the above criteria, management will use a combination of policies and techniques for the management of working capital. These policies aim at managing the current assets (generally cash and cash equivalents, inventories and debtors) and the short term financing, such that cash flows and returns are acceptable.

* Cash management. Identify the cash balance which allows for the business to meet day to day expenses, but reduces cash holding costs.

* Inventory management. Identify the level of inventory which allows for uninterrupted production but reduces the investment in raw materials – and minimizes reordering costs – and hence increases cash flow; see Supply chain management; Just In Time (JIT); Economic order quantity (EOQ); Economic production quantity (EPQ).

* Debtors management. Identify the appropriate credit policy, i.e. credit terms which will attract customers, such that any impact on cash flows and the cash conversion cycle will be offset by increased revenue and hence Return on Capital (or vice versa); see Discounts and allowances.

* Short term financing. Identify the appropriate source of financing, given the cash conversion cycle: the inventory is ideally financed by credit granted by the supplier; however, it may be necessary to utilize a bank loan (or overdraft), or to “convert debtors to cash” through “factoring”.

One of the most important aspects of a customer service KPI is that of what is often referred to as the “Feel Good Factor”. Basically the goal is to not only help the customer have a good experience, but to offer them an experience that exceeds their expectations. Several key points are listed as follows:

1. Know your product – Know what products/service you are offering back to front. In other words be an information expert. It is okay to say “I don’t know”, but it should always be followed up by… “but let me find out” or possibly ” but my friend knows!” Whatever the situation may be, make sure that you don’t leave your customer with an unanswered question.

2. Body Language/Communication – Most of the communication that we relay to others is done through body language. If we have a negative body language when we interact with others it can show our lack of care. Two of the most important parts of positive body language are smiling, and eye contact. Make sure to look your customers in the eye. It shows that we are listening to them, not at them. And then of course smiling is just more inviting than someone who has a blank look on their face.

3. Anticipate Guest Needs – Nothing surprises your customer more than an employee going the extra mile to help them. Always look for ways to serve your customer more than they expect. In doing so it helps them to know that you care and it will leave them with the “Feel Good Factor” that we are searching for.

Elon Musk, Paypal and Tesla co-owner, is broke.

Elon Musk broke again after going from rags to riches. PayPal co-founder Elon Musk has been spending a lot of money, so much that he’s broke and asking colleagues for a handout to get by. One might ask how Elon Musk, who also owns electric car company Tesla, could be so broke.

“About four months ago, I ran out of cash,” Elon Musk said in a statement. He’s been spending some $200,000 a month, according to a recent court filing. However, don’t be fooled, the businessman is still super rich because he owns at least 65 percent of Tesla Motors. Tesla is scheduled to hold an IPO in a few weeks that’s likely to value the company at around $1.4 billion.

Musk, who will turn 39 next week, is also going through a divorce. His case is a reminder of the difference between solvency and liquidity: A person (or a company) can be worth a ton of money, yet still face a cash crunch if the assets can’t easily be turned into cash. “My assets are huge,” Elon said.

However, the entrepreneur will soon have cash again, it’s a cycle that business men of his size go through. The economic recession played a big part in his situation because he kept on spending money on new ventures such as rocket ships. Yes, even the rich and famous have to borrow money from family and friends, just to be able to live.

See the entire article here

Marketing is defined by the American Marketing Association (AMA) as “the activity, set of institutions, and processes for creating, communicating, delivering, and exchanging offerings that have value for customers, clients, partners, and society at large.” The term developed from the original meaning which referred literally to going to a market to buy or sell goods or services. Seen from a systems point of view, sales process engineering views marketing as “a set of processes that are interconnected and interdependent with other functions, whose methods can be improved using a variety of relatively new approaches.”

The Chartered Institute of Marketing defines marketing as “the management process responsible for identifying, anticipating and satisfying customer requirements profitably.” A different concept is the value-based marketing which states the role of marketing to contribute to increasing shareholder value. In this context, marketing is defined as “the management process that seeks to maximize returns to shareholders by developing relationships with valued customers and creating a competitive advantage.”

Marketing practice tended to be seen as a creative industry in the past, which included advertising, distribution and selling. However, because the academic study of marketing makes extensive use of social sciences, psychology, sociology, mathematics, economics, anthropology and neuroscience, the profession is now widely recognized as a science, allowing numerous universities to offer Master-of-Science (MSc) programs. The overall process starts with marketing research and goes through market segmentation, business planning and execution, ending with pre and post-sales promotional activities. It is also related to many of the creative arts. The marketing literature is also adept at re-inventing itself and its vocabulary according to the times and the culture.

Proper knowledge of finance and financial metrics means life or death of any company.

Productions and operations are the lifeblood of any company.

Never forget that innovation – through research and development are the future to any business.

The measure of innovation at the organizational level relates to individuals, team-level assessments, private companies from the smallest to the largest. Measure of innovation for organizations can be conducted by surveys, workshops, consultants or internal benchmarking. There is today no established general way to measure organizational innovation. Corporate measurements are generally structured around balanced scorecards which cover several aspects of innovation such as business measures related to finances, innovation process efficiency, employees’ contribution and motivation, as well benefits for customers. Measured values will vary widely between businesses, covering for example new product revenue, spending in R&D, time to market, customer and employee perception & satisfaction, number of patents, additional sales resulting from past innovations.

1 a : progress, advance <in the process of time> b : something going on : proceeding
2 a (1) : a natural phenomenon marked by gradual changes that lead toward a particular result <the process of growth> (2) : a continuing natural or biological activity or function <such life processes as breathing> b : a series of actions or operations conducing to an end; especially : a continuous operation or treatment especially in manufacture

1 : the introduction of something new
2 : a new idea, method, or device