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Working Capital Management
Notes
Case Study Bhatt Enterprises Case: Cash Forecasting and Investing
ushma is the Treasurer of Bhatt Enterprises, a poorly organized collection of financial
services companies. The composition of Bhatt’s activities can best be seen in a
Sstatement of forecasted cash flow by each major business line, namely:
Annual Cash Flow
Insurance policies $ 85,000,000
Insurance underwriting 55,000,000
Assets based lending 200,000,000
Consumer paper 155,000,000
Auto dealer paper 80,000,000
$ 575,000,000
Sushma has inherited a concentration banking system, as shown in Figure 1. After examining
its features, he felt satisfied that it meets the needs of Bhatt Enterprises. The hometown
bank in San Francisco. California is not a member of any clearinghouse; all cheques are
processed through a correspondent relationship with security. The lockboxes in Phoenix
and Seattle are efficiently managed by security and thus, average only one day float. This
is the same as for funds deposited directly as security. Excess funds are wired daily to New
Jersey for same day investment.
Figure 1: Bhatt Enterprises Concentration Banking System
CUSTOMERS
NEW YORK BANK Check smailed
Backup Lines
Investing funds
LOCK BOXBANK
Seattle
CONCENTRATION
Daily
BANK
Security Removal LOCK BOXBANK
Phoenix
Instructions and information
CORPORATE RECEIVING AND
TREASURER DISBURSING BANK
Check Drawn San Leonardo Daily
Funding of Clearings
Mail Vendors. Banking
Float Etc. System
Contd...
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