Credit-Management課件(PPT 54頁(yè))

1、Corporate Finance Ross Westerfield JaffeSixth EditionSixth Edition29Chapter Twenty Nine Credit Management第1頁(yè)，共54頁(yè)。Chapter Outline29.1 Terms of the Sale29.2 The Decision to Grant Credit: Risk and Information 29.3 Optimal Credit Policy29.4 Credit Analysis29.5 Collection Policy29.6 How to Finance Trade

2、 Credit29.7 Summary & Conclusions第2頁(yè)，共54頁(yè)。IntroductionA firms credit policy is composed of:Terms of the saleCredit analysisCollection policyThis chapter discusses each of the components of credit policy that makes up the decision to grant credit.第3頁(yè)，共54頁(yè)。The Cash Flows of Granting CreditCredit sale

3、is madeCustomer mails checkFirm deposits checkBank credits firms accountAccounts receivableCash collectionTime第4頁(yè)，共54頁(yè)。29.1 Terms of the SaleThe terms of sale of composed ofCredit PeriodCash DiscountsCredit Instruments第5頁(yè)，共54頁(yè)。Credit PeriodCredit periods vary across industries.Generally a firm must

4、consider three factors in setting a credit period:The probability that the customer will not pay.The size of the account.The extent to which goods are perishable.Lengthening the credit period generally increases sales第6頁(yè)，共54頁(yè)。Cash DiscountsOften part of the terms of sale.Tradeoff between the size of

5、 the discount and the increased speed and rate of collection of receivables.An example would be “3/10 net 30”The customer can take a 3% discount if he pays within 10 days.In any event, he must pay within 30 days.第7頁(yè)，共54頁(yè)。The Interest Rate Implicit in 3/10 net 30A firm offering credit terms of 3/10 n

6、et 30 is essentially offering their customers a 20-day loan.To see this, consider a firm that makes a $1,000 sale on day 0Some customers will pay on day 10 and take the discount.Other customers will pay on day 30 and forgo the discount.01030$97001030$1,000第8頁(yè)，共54頁(yè)。01030+$970-$1,000A customer that fo

7、rgoes the 3% discount to pay on day 30 is borrowing $970 for 20 days and paying $30 interest: The Interest Rate Implicit in 3/10 net 30第9頁(yè)，共54頁(yè)。Credit InstrumentsMost credit is offered on open accountthe invoice is the only credit instrument.Promissory notes are IOUs that are signed after the delive

8、ry of goodsCommercial drafts call for a customer to pay a specific amount by a specific date. The draft is sent to the customers bank, when the customer signs the draft, the goods are sent.Bankers acceptances allow a bank to substitute its creditworthiness for the customer, for a fee.Conditional sal

9、es contracts let the seller retain legal ownership of the goods until the customer has completed payment.第10頁(yè)，共54頁(yè)。29.2 The Decision to Grant Credit: Risk and Information Consider a firm that is choosing between two alternative credit policies:“In God we trusteverybody else pays cash.”O(jiān)ffering their

10、 customers credit. The only cash flow of the first strategy is The expected cash flows of the credit strategy are:01We incur costs up frontand get paid in 1 period by h% of our customers.第11頁(yè)，共54頁(yè)。29.2 The Decision to Grant Credit: Risk and Information The NPV of the cash only strategy isThe NPV of

11、the credit strategy isThe decision to grant credit depends on four factors:The delayed revenues from granting credit,The immediate costs of granting credit,The probability of repayment, hThe discount rate, rB第12頁(yè)，共54頁(yè)。Example of the Decision to Grant CreditA firm currently sells 1,000 items per mont

12、h on a cash basis for $500 each.If they offered terms net 30, the marketing department believes that they could sell 1,300 items per month.The collections department estimates that 5% of credit customers will default.The cost of capital is 10% per annum.第13頁(yè)，共54頁(yè)。Example of the Decision to Grant Cre

13、ditThe NPV of cash only:The NPV of Net 30:第14頁(yè)，共54頁(yè)。Example of the Decision to Grant CreditHow high must the credit price be to make it worthwhile for the firm to extend credit?The NPV of Net 30 must be at least as big as the NPV of cash only:第15頁(yè)，共54頁(yè)。The Value of New Information about Credit RiskT

14、he most that we should be willing to pay for new information about credit risk is the present value of the expected cost of defaults: In our earlier example, with a credit price of $500, we would be willing to pay $26,000 for a perfect credit screen.第16頁(yè)，共54頁(yè)。Future Sales and the Credit DecisionDo n

15、ot give creditGive creditCustomer pays h = 100%Customer pays (Probability = h)Customer defaults(Probability = 1 h)Give creditDo not give creditOur first decision:We refuse further sales to deadbeats.We face a more certain credit decision with our paying customers:Information is revealed at the end o

16、f the first period:第17頁(yè)，共54頁(yè)。29.3 Optimal Credit PolicyCarrying CostsTotal costsC*Costs in dollarsLevel of credit extended At the optimal amount of credit, the incremental cash flows from increased sales are exactly equal to the carrying costs from the increase in accounts receivable. Opportunity co

17、sts第18頁(yè)，共54頁(yè)。29.3 Optimal Credit PolicyTrade Credit is more likely to be granted if:The selling firm has a cost advantage over other lenders.The selling firm can engage in price discrimination.The selling firm can obtain favorable tax treatment.The selling firm has no established reputation for qual

18、ity products or services.The selling firm perceives a long-term strategic relationship.The optimal credit policy depends on the characteristics of particular firms.第19頁(yè)，共54頁(yè)。29.4 Credit AnalysisCredit InformationFinancial StatementsCredit Reports on Customers Payment History with Other FirmsBanksCus

19、tomers Payment History with the FirmCredit Scoring: The traditional 5 Cs of creditCharacterCapacityCapital CollateralConditionsSome firms employ sophisticated statistical models第20頁(yè)，共54頁(yè)。29.5 Collection PolicyCollection refers to obtaining payment on past-due accounts.Collection Policy is composed o

20、fThe firms willingness to extend credit as reflected in the firms investment in receivables.Collection Effort第21頁(yè)，共54頁(yè)。Average Collection PeriodMeasures the average amount of time required to collect an account receivable. For example, a firm with average daily sales of $20,000 and an investment in

21、accounts receivable of $150,000 has an average collection period of第22頁(yè)，共54頁(yè)。Accounts Receivable Aging ScheduleShows receivables by age of account.The longer an account has been unpaid, the less likely it is to be paid.第23頁(yè)，共54頁(yè)。Collection EffortMost firms follow a protocol for customers that are pa

22、st due:Send a delinquency letter.Make a telephone call to the customer.Employ a collection agency.Take legal action against the customer.There is a potential for a conflict of interest between the collections department and the sales department.You need to strike a balance between antagonizing a cus

23、tomer and being taken advantage of by a deadbeat.第24頁(yè)，共54頁(yè)。FactoringThe sale of a firms accounts receivable to a financial institution (known as a factor).The firm and the factor agree on the basic credit terms for each customer.FirmFactorCustomerCustomers send payment to the factorThe factor pays a

24、n agreed-upon percentage of the accounts receivable to the firm. The factor bears the risk of nonpaying customersGoods第25頁(yè)，共54頁(yè)。29.6 How to Finance Trade CreditThere are three general ways of financing accounting receivables:Secured DebtReferred to as asset-based receivables financing.The predominan

25、t form of receivables financing.Captive Finance CompanyLarge companies with good credit ratings often form a finance company as a subsidiary of the firm.SecuritizationOccurs when the selling firm sells its accounts receivable to a financial institution, which then pools the receivables and sells sec

26、urities backed by these assets.第26頁(yè)，共54頁(yè)。29.7 Summary & ConclusionsThe components of a firms credit policy are the terms of sale, the credit analysis, and the collection policy.The decision to grant credit is a straightforward NPV problem. Additional information about the probability of customer def

27、ault has value, but must be weighed against the cost of the information.The optimal amount of credit is a function of the conditions in which a firm finds itself.The collection policy is the firms method for dealing with past-due accountsit is an integral part of the decision to extend credit.第27頁(yè)，共

28、54頁(yè)。Corporate Finance Ross Westerfield JaffeSixth EditionSixth Edition30Chapter Thirty Mergers and Acquisitions第28頁(yè)，共54頁(yè)。Chapter Outline30.1 The Basic Forms of Acquisitions30.2 The Tax Forms of Acquisitions30.3 Accounting for Acquisitions30.4 Determining the Synergy from an Acquisition30.5 Source of

29、 Synergy from Acquisitions30.6 Calculating the Value of the Firm after an Acquisition30.7 A Cost to Stockholders from Reduction in Risk30.8 Two Bad Reasons for Mergers30.9 The NPV of a Merger30.10 Defensive Tactics30.11 Some Evidence on Acquisitions30.12 The Japanese Keiretsu30.13 Summary and Conclu

30、sions第29頁(yè)，共54頁(yè)。30.1 The Basic Forms of AcquisitionsThere are three basic legal procedures that one firm can use to acquire another firm:MergerAcquisition of StockAcquisition of Assets第30頁(yè)，共54頁(yè)。Varieties of TakeoversTakeoversAcquisitionProxy ContestGoing Private(LBO)MergerAcquisition of StockAcquisit

31、ion of Assets第31頁(yè)，共54頁(yè)。30.2 The Tax Forms of AcquisitionsIf it is a taxable acquisition, selling shareholders need to figure their cost basis and pay taxes on any capital gains.If it is not a taxable event, shareholders are deemed to have exchanged their old shares for new ones of equivalent value.第

32、32頁(yè)，共54頁(yè)。30.3 Accounting for AcquisitionsThe Purchase MethodThe source of much “goodwill”Pooling of InterestsPooling of interest is generally used when the acquiring firm issues voting stock in exchange for at least 90 percent of the outstanding voting stock of the acquired firm. Purchase accounting

33、 is generally used under other financing arrangements.第33頁(yè)，共54頁(yè)。30.4 Determining the Synergy from an AcquisitionMost acquisitions fail to create value for the acquirer. The main reason why they do not lies in failures to integrate two companies after a merger.Intellectual capital often walks out the

34、 door when acquisitions arent handled carefully. Traditionally, acquisitions deliver value when they allow for scale economies or market power, better products and services in the market, or learning from the new firms.第34頁(yè)，共54頁(yè)。30.5 Source of Synergy from AcquisitionsRevenue EnhancementCost Reducti

35、onIncluding replacing ineffective managers.Tax Gains Net Operating LossesUnused Debt CapacityThe Cost of CapitalEconomies of Scale in Underwriting.第35頁(yè)，共54頁(yè)。30.6 Calculating the Value of the Firm after an AcquisitionAvoiding MistakesDo not Ignore Market ValuesEstimate only Incremental Cash FlowsUse

36、the Correct Discount RateDont Forget Transactions Costs第36頁(yè)，共54頁(yè)。30.7 A Cost to Stockholders from Reduction in RiskThe Base CaseIf two all-equity firms merge, there is no transfer of synergies to bondholders, but if One Firm has DebtThe value of the levered shareholders call option falls.How Can Sha

37、reholders Reduce their Losses from the Coinsurance Effect?Retire debt pre-merger.第37頁(yè)，共54頁(yè)。30.8 Two Bad Reasons for MergersEarnings GrowthOnly an accounting illusion.DiversificationShareholders who wish to diversify can accomplish this at much lower cost with one phone call to their broker than can

38、management with a takeover.第38頁(yè)，共54頁(yè)。30.9 The NPV of a MergerTypically, a firm would use NPV analysis when making acquisitions.The analysis is straightforward with a cash offer, but gets complicated when the consideration is stock.第39頁(yè)，共54頁(yè)。The NPV of a Merger: CashNPV of merger to acquirer = Synerg

39、y Premium Premium = Price paid for B - VBNPV of merger to acquirer = Synergy - Premium第40頁(yè)，共54頁(yè)。The NPV of a Merger: Common StockThe analysis gets muddied up because we need to consider the post-merger value of those shares were giving away.第41頁(yè)，共54頁(yè)。Cash versus Common StockOvervaluationIf the targe

40、t firm shares are too pricey to buy with cash, then go with stock.TaxesCash acquisitions usually trigger taxes.Stock acquisitions are usually tax-free.Sharing Gains from the MergerWith a cash transaction, the target firm shareholders are not entitled to any downstream synergies.第42頁(yè)，共54頁(yè)。30.10 Defen

41、sive TacticsTarget-firm managers frequently resist takeover attempts.It can start with press releases and mailings to shareholders that present managements viewpoint and escalate to legal action.Management resistance may represent the pursuit of self interest at the expense of shareholders.Resistanc

42、e may benefit shareholders in the end if it results in a higher offer premium from the bidding firm or another bidder.第43頁(yè)，共54頁(yè)。DivestituresThe basic idea is to reduce the potential diversification discount associated with commingled operations and to increase corporate focus,Divestiture can take th

43、ree forms:Sale of assets: usually for cashSpinoff: parent company distributes shares of a subsidiary to shareholders. Shareholders wind up owning shares in two firms. Sometimes this is done with a public IPO.Issuance if tracking stock: a class of common stock whose value is connected to the performa

44、nce of a particular segment of the parent company.第44頁(yè)，共54頁(yè)。The Corporate CharterThe corporate charter establishes the conditions that allow a takeover.Target firms frequently amend corporate charters to make acquisitions more difficult.ExamplesStaggering the terms of the board of directors.Requirin

45、g a supermajority shareholder approval of an acquisition第45頁(yè)，共54頁(yè)。Repurchase Standstill AgreementsIn a targeted repurchase the firm buys back its own stock from a potential acquirer, often at a premium.Critics of such payments label them greenmail.Standstill agreements are contracts where the biddin

46、g firm agrees to limit its holdings of another firm. These usually leads to cessation of takeover attempts.When the market decides that the target is out of play, the stock price falls.第46頁(yè)，共54頁(yè)。Exclusionary Self-TendersThe opposite of a targeted repurchase.The target firm makes a tender offer for i

47、ts own stock while excluding targeted shareholders.第47頁(yè)，共54頁(yè)。Going Private and LBOsIf the existing management buys the firm from the shareholders and takes it private.If it is financed with a lot of debt, it is a leveraged buyout (LBO).The extra debt provides a tax deduction for the new owners, whil

48、e at the same time turning the pervious managers into owners. This reduces the agency costs of equity第48頁(yè)，共54頁(yè)。Other Devices and the Jargon of Corporate TakeoversGolden parachutes are compensation to outgoing target firm management.Crown jewels are the major assets of the target. If the target firm management is desperate enough, they will sell off the crown jewels.Poison pills are measures of true desperation to make the firm unattractive to bidders. They reduce shareholder wealth.One example of a poison pill