Managing Working Capital
Overview
Managing working capital on a day-to-day basis is probably the most important task for financial managers. To neglect any component can cost money and can affect relationships with customers and suppliers. This chapter looks closely at the problems facing managers and at some of the processes available to deal with them.
You already know the components of working capital, how to present them in financial reports and some useful ratios external analysts can use to get a feel for a firm's short-term solvency. We now look at the management tasks and procedures that lie behind the accounting concepts and measures.
Learning objectives
After completing the work for this chapter you should be able to:
- Describe the procedures for the efficient management of current assets and current liabilities
- Explain the concept of working capital
- Outline the issues and costs in managing inventory
- Discuss the main ways of managing accounts receivable
- Explain the most efficient ways of managing cash and other liquid assets
- Describe how best to manage trade creditors
- Define the new terms and concepts identified in this chapter
