Working Capital Management

CHAPTER 14 Working expectant Management Learning Objectives 1. rig net running(a) capital, discuss the importance of working capital management, and be adapted to aim a firms net working capital. 2.Define the operating and exchange cycles, explain how they are used, and be able to compute their values for a firm. 3.Discuss the relation back advantages and disadvantages of pursuing (1) flexible and (2) restrictive authoritative summation investment strategies. 4.Explain how accounts receivable are created and managed, and be able to compute the cost of trade credit. 5.Explain the trade-off between carrying be and re club costs, and be able to compute the economic order quantity for a firms inventory orders. 6.Define cash accruement time, discuss how a firm depose minimize this time, and be able to compute the cash collection costs and benefits of a lockbox. 7.Identify three current asset financing strategies and discuss the main sources of short-term financing. I.Chapter Outline 14.1 Working Capital Basics Working capital management involves two key issues. ?What is the grab amount and mix of current assets for the firm to hold? ?How should these current assets be financed?

Discussions with CFOs quickly lead to the conclusion that, as chief(prenominal) as capital bud attracting and capital structure decisions are, they are do less frequently, while the day-to-day complexities involving the management of net working capital (especially cash and inventory) consume tremendous amounts of management time. Also, it is uncontaminating that while poor long-term investment and financing decisions ordain adversely impact firm value, poor short-term pecuniary decisions will impair the firms ability to reside operating. Finally, working capital decisions can also have a major impact on firm value. Let us review some basic definitions related to working capital. ? on-going assets are cash and other assets that the firm expects to convert into cash in a year or less. ?... If you want to get a full essay, order it on our website: Ordercustompaper.com

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