lockbox system v concentration banking
Thank you for allowing me to assist your inquiring regarding the difference between the lockbox system and the concentration banking. I am delighted to provide you with a summary of each method, as well as their potential benefits.
The lockbox system allows your customer to send the check directly to your bank account. I would like to take an example of sending the check to your post office box and how the lockbox system may benefit your company. If your customer sends checks to your post box, there are chances of checks being lost during the transit. Additionally, it takes longer time for the delivery to be made. The lockbox system prevents those problems as the checks are received directly to your bank accounts. Naturally, larger amounts of checks can be wired using the lockbox system. The reduced deposit float, allowing larger amounts of checks may increase the interest income staying in your bank account. However, it is very important to consider the banking fees.
With the concentration banking, you are concentrating your bank accounts into a single local bank account. The benefit of this measure is that it reduces the deposit float signifantly. Consequently, the decreased deposit float may increase the interest income for your end.
By effectively implementing either lockbox system or concentration banking, the working capital would improve via decreasing the deposit float. Improved working capital condition would have a positive impact on the financial ratios.
I hope this memorandum clears your question regarding the difference between the lockbox system and the concentration banking. Should you have any questions and concerns as you review the memorandum in detail, please do not hesistate to contact me.
Thank you.
Best regards,
test taker
st lt financing
Thank you for allowing me to assist you with your inquiry regarding the difference between the short-term and long-term financing. It is my great pleasure to provide a summary of the definition, benefits and drawbacks of each method. Also, please kindly note that this memorandum is written under the presumption of a normal yield curve.
The short-term financing matures in one year from the issuance date. The interest rates for the short-term financing is usually lower than the interest rates of the long-term financing. Thus, one of the benefits of the short-term financing lies in its cost-efficiency, resulting in reduced interest payments for the borrowers.
Another benefit of the short-term financing is that it can potentially lead to higher profitability. The current assets turnover will inevitably increase, reducing the cash conversion cycle.
However, it is important to note that while the short-term financing eases the burden of interest payment burdens, it also increases the interest rate risk for the borrowers. Therefore, borrowers may need to consider investing in floating rate debt securities to hedge against the negative impacts.
The long-term financing has a maturity period extending beyond one year. Typically, its interest rates are higher than the interest rates of the short-term financing. Due to this characteristic, the borrower faces a higher burden of interest rate payments. Additinally, the profitability may decrease due to the combination of the higher interest rates and lower cash conversion cycle.
The benefits of the long-term financing can include enhanced working capital condition. The comibination of the extended maturity date and the inflow of cash has a positive impact on the working capital. Furthermore, the borrower faces lower interest rate risk thanks to the increased maturity.
By effectively implementing financing policies, your firm may benefit from increased liquidity, working capital conditions, interest income and stronger capital structure. However, please note that excessive borrowings can increase the risk of default, which may lead to non-compliance with the debt covenants.
I hope this memorandum clarifies your question regarding the difference between the short-term and long-term financing. Should you have further questions or concerns as you review the memorandum in detail, please do not hesistate to contact me.
Thank you. Best regards, test taker
it controls for inventory system
Thank you for allowing me to assist you with your inquiry regarding the IT controls for the inventory system. I am delighted to provide a summary to explain the IT controls such as access controls, inventory management and database management.
Firstly, I would like to explain the access controls that can be used for the inventory system. It is imperative to safeguard the system against the unauthorized access. Therefore, a system administrator should manage the authorization matrix to assign each user the access to the system varying on their user profiles.
Furthermore, the segregation of duties and role-based access control should be considered when assigning the access to the users. The extent and level of access to the data should be within the limit of pre-defined job descriptions.
The inventory system should allow the effective and real-time management of inventory. The measures such as bardcode scanning or radio frequency identification (RFID) can be used to acheive this purpose.
Database management should include the change control, exhaustive data log and recovery plan. Change control should define the personnel who are able to access, edit, delete, or add the data. Additionally, it is important to have the authorization in place to make changes in the database. A good internal control is to have an exhaustive data log that contains when and by whom the changes are made in the data.
Lastly, the disaster recovery plan should be developed and tested in advance to make sure that the downtime is minimized.
I hope this memorandum clarifies your question regarding the IT controls regarding the inventory system. Should you have further questions or concerns as you review the memorandum in detail, please do not hesistate to contact me.
ERM help evaluate opportunities
The enterprie risk management (ERM) is the consoliation of capabilities, culture, practicies integrated with object-setting and strategies, that organization relies on to manage risks in creating, realizing and peserving value.
The ERM framework challenges the managment to view the risks as opportunities to maintain or increase its competitive advantage by utilizing market or operational conditions.
The ERM framework has five steps which includes developing holistic view, identifying risks, assessing severity of risks, prioritizing risks and responding to the risks. I will explain each of the five step in the following paragraphs.
Developing a holistic view means considering the risks on the entity level. For example, a significant risk at a specific divisonal level may not be a risk for the entity. Therefore, it is important to view the risks in portfolio. It is also important to consider the risk appetite of the corporation.
Identifying risks involves searching for the events or obstacles that can potentially prevent the corporation from achieving its objectives or strategies.
Assessing severity of risks involves assessing risks and opportunities at multiple levels. It can include the consideration for the inherent risks, target residual risks and actions taken by the management to minimize the inherenet risks.
Prioritizing risks should be based on the business strategy and risk appetites.
Lastly, responding to the risks include avoidance, reduction, transfer and sharing the risks.