,Click to modify the subtitles style,Jul. 2002, Page,*,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Click to modify the text styles,Second level,Third level,Fourth level,fifth level,Click to modify the subtitles style,Click to modify the text styles,Second level,Third level,Fourth level,fifth level,Jul. 2002, Page,1,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Operational Working Capital Management,-Financing Schemes in Receivables Management,Alcatel-2002,Wu Yajun,Jul. 2002, Page 1. FINANCIAL,Jul. 2002, Page,2,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,ORGANIZATION CHART,Jul. 2002, Page 2. FINANCIAL,Jul. 2002, Page,3,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,What is Accounting,Accounting is a science,GAAP,A dialogue between a missile expert and accounting professor,Accounting is an art,Importance principal,Accounting estimate, accounting accrual, accounting provision,etc,Accounting is a magic (cooking),Enron event,Worldcom event,Jul. 2002, Page 3. FINANCIAL,Jul. 2002, Page,4,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Working Capital vs OWC,Working Capital,Working Capital,Balance Sheet,Working Capital = Current Assets - Current Liability,OWC,OWC,Cash flow statement,operation activities,investment activities,financing activities,Cash Concept,Jul. 2002, Page 4. FINANCIAL,Jul. 2002, Page,5,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Working Capital vs OWC,Cash is the beginning point and the ending point within the cash flow, but cash does not involve in the cash flow.,Cash is not operational asset generally,OWC is concluded as follows,OWC = Advance Payment + Inventory +AR - AP,OWC yield = sales / average OWC,Jul. 2002, Page 5. FINANCIAL,Jul. 2002, Page,6,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,OWC management,OWC draws more and more attention in modern society,Inventory Management,Inventory Turnover = COGS /Average Inventory,Just In Time Concept,Accounts Receivables Management,Receivables magt. becomes more and more important now,Credit assessment through business circulation,Financing Schemes,Jul. 2002, Page 6. FINANCIAL,Jul. 2002, Page,7,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Customer Accept.,Procedure,Contract&Order,Processing,Goods Delivery,Procedure,Billing&Process,Acct. Receivable,Collection&Follow-up of overdue,Credit Magt.Circulation,Credit Management,through business circulation,Jul. 2002, Page 7. FINANCIAL,Jul. 2002, Page,8,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Receivables Management,Credit Value Assessment,Credit Value Assessment,financial reports analysis,financial ratios analysis,5C standards analysis,Character, Capacity, Capital, Collateral, Condition,aging analysis of receivables and overdue,Take Attribute Analysis Model to assess credit of the customer,Use the three categories information to grade each customer,the customer characteristics,Jul. 2002, Page 8. FINANCIAL,Jul. 2002, Page,9,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Receivables Management,Credit Value Assessment,the customer characteristics,customer impression, product introduction, product requirement, /the ability to compete, final user, internal management&control system,the priority characteristics,profitability, product quality, the market drawing, /the market competition status, product guarantee, substitute of the customer,the credit characteristics,payment history, the credit certificate, net assets&profit growth rate, debt status, capital structure ratio,total capital,Jul. 2002, Page 9. FINANCIAL,Jul. 2002, Page,10,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Attribute Analysis Model,Jul. 2002, Page 10. FINANCIAL,Jul. 2002, Page,11,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,OWC Management,Financing Schemes applied in Alcatel,Receivables Financing Scheme,Buyers Credit,Lease,Factoring,AR Trust,AR Securitization,Domestic Letter of Credit,Letter of Guarantee,Credit Insurance,Jul. 2002, Page 11. FINANCIAL,Jul. 2002, Page,12,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Buyers Credit,Buyers Credit,Alcatel arranges banks to grant our mobile customers the credit line to fund our Accounts Receivable under the commercial contract since the customer is lack of enough cash to cover their accounts payable.,Advantage,Customer borrows the loan directly from the bank,Disadvantage,Customer has the right to decide to borrow or not,Need extensive negotiation among the branches of the bank,Profit sharing among the branches of the bank,Jul. 2002, Page 12. FINANCIAL,Jul. 2002, Page,13,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Buyers Credit,1.,B/C application,3.,B/Cs need report,4.,Instruction Plan,5.,Loan application,6.,loan report,7.,loan approval,8.,Loan lending,2.,Loan notification,9.,Pay Alcatel,A L C,T E L,X Bank in sellers area,X Bank,H.Q.,X Bank in buyers area,Customer,Jul. 2002, Page 13. FINANCIAL,Jul. 2002, Page,14,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Lease,Lease vs Bridge Lease,Under bridge lease, bank plays a very important role which is different from Lease.,Alcatel applies bridge lease. Here Lease company only acts as an intermediary, who only receives management fee. The cash flows directly out of or into the bank.,Operational Lease vs Capital Lease,Accounting method of capital lease,Improve financial statements by capital lease,Leveraged Lease, sublease and lease back,Jul. 2002, Page 14. FINANCIAL,Jul. 2002, Page,15,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Lease,3.,Pay Alcatel,1.,Bridge Leasing Contract,5.,Rent Repayment,Customer,A L C,T E L,Bank,Lease Co.,4.,Pay Magt.fee,2.,Goods Delivery,Jul. 2002, Page 15. FINANCIAL,Jul. 2002, Page,16,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Factoring,Factoring,Alcatel sells receivables under the commercial contract with the customers to banks to get the cash back in time while referring to the poor credit of the customers.,Advantage,quick in getting cash back,Disadvantage,qualified customers,qualified receivables,Jul. 2002, Page 16. FINANCIAL,Jul. 2002, Page,17,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Factoring,1.,Commercial Contract,3.,Transfer Notification,4.,Receivables Purchase,and Pay,2.,Factoring Application,5.,Customer Pay,6.,Lawsuit instead,Customer,X Bank,A L C,T E L,Jul. 2002, Page 17. FINANCIAL,Jul. 2002, Page,18,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Trust,Separate operation vs. Hybrid operation,Advantage,Bankruptcy isolation,Not real transfer,No recourse to the principal of the loan,Disadvantage,Grey area of legislation,Not mature local market,Jul. 2002, Page 18. FINANCIAL,Jul. 2002, Page,19,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Trust,Customer,X Bank,Trustee,A L C,T E L,1.,Commercial Contract,2.,Entrust Agreement,3.,Loan Agreement,4,.,Customer Pay,Jul. 2002, Page 19. FINANCIAL,Jul. 2002, Page,20,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-AR Securitization,Securitization vs. Private placement,major concerns,True sale,Bankruptcy Isolation,Hard offer or best offer,Portfolio or not,Transferable beneficiary note or not,Jul. 2002, Page 20. FINANCIAL,Jul. 2002, Page,21,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Securitization,Customer,SPV,Investors,A L C,T E L,4.,Issue beneficiary note,2.,Securization Agreement,5,.,Customer Pay,3.,Pay Alcatel,1.,Commercial Contract,6.,Pay principle&interest,Jul. 2002, Page 21. FINANCIAL,Jul. 2002, Page,22,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,Domestic Letter of Credit,Domestic L/C,The same as international L/C except the requirement of the documents from the local banks,Disadvantage,rarely applied in domestic market,strict requirement of the documents (VAT invoice),only be applied within the same bank,Jul. 2002, Page 22. FINANCIAL,Jul. 2002, Page,23,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Domestic Letter of Credit,1.,L/C application,7.,Document Checking,3.,Documents requirement,5.,Documents Hand-over,2.,L/C Notice,6.,Documents Transfer,4.,Goods Delivery,8.,Make Payment,Bank X Branch,Bank Y Branch,Customer,Alcatel,Jul. 2002, Page 23. FINANCIAL,Jul. 2002, Page,24,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Letter of Guarantee,Letter of Guarantee,Alcatel issues L/G first to get cash back and promise to exercise the commercial contract as required.,Only for standby use,Advantage,low issuing cost,widely applied in local market since banks credit is better than firms credit,Disadvantage,significant commercial disputes or not,Jul. 2002, Page 24. FINANCIAL,Jul. 2002, Page,25,.,FINANCIAL MANAGEMENT DEPT., ALCATEL,Financing Schemes,-Credit Insurance,Credit Insurance,applied to cover export credit risk,based on the support of the project by the government,Can be introduced to domestic market,International practice,WTO entrance,Probability & mature domestic market,Jul. 2002, Page 25. FINANCIAL,