The working capital cycle (with audio link)

I was asked to elaborate on Friday's lecture and talk a bit more about the working capital cycle. Here are some slides on the subject - copied from my book - and indeed, the front cover of the book so you can see what to buy!

The Slide 19.1 is the working capital cycle that I put up on the board yesterday. Slide 19.2 is an illustration of the different working capital arangements in different industries.

The book is Corporate Financial Strategy, by Ruth Bender and Keith Ward, and is published by Butterworth Heinemann. An Amazon link is here, but my students are probably better off buying it in the campus bookshop. (It is required reading for my elective!)
http://www.amazon.co.uk/Corporate-Financial-Strategy-Ruth-Bender/dp/0750686650/ref=sr_1_1?ie=UTF8&s=books&qid=1264852042&sr=8-1

And an audio explanation of all of this - freshly recorded - is at http://www.ipadio.com/phlogs/RuthBender/2010/01/30/Ruths-phlog-1st-phonecast

(Finally - for any students wanting more about working capital and DCF - I'll deal with that in the next lecture.)

UK Non-bank lending report from the Treasury

Last week the Treasury produced a rather interesting paper with a rather tedious title - "Discussion paper on developing non-bank lending channels for UK businesses"

You can find it on http://www.hm-treasury.gov.uk/fin_non_banking.htm

The reasons I like it are twofold. Firstly, it builds on the brief run-through of Debt that I did in that first lecture on financial instruments, giving more detail on bonds. And secondly - the really interesting bit - is that it gives facts, but it's really a 'think' piece - asks a lot of questions about what would be needed to change the UK market to have some of the better characteristics of the US market, with a higher % of non-bank lending.

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Extract:
1.4 This discussion paper provides background on non-bank lending channels (Section 2) and then goes on to discuss some of the key factors that are shaping them (Section 3):
credit assessment and monitoring; fewer UK companies are credit rated than in
the US;
corporate transparency; how much company information needs to be disclosed;
transparency in the pricing of loans; whether there is sufficient transparency to
enable companies to compare the prices of bank and non-bank loans;
preferences of UK investors; whether these are a barrier to expanding non-bank
lending to more corporates;
non-bank loan markets and high yield bond markets, whether the characteristics
or structures of these markets deter investors.

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If any of the Execs (or later in the year the FT students) want to do their IFB assessment around answering some of the questions it raises, or on developing more of an analysis of the debt market, I'd be very happy to discuss it with you.