The management of working capital and sources of finance
‘It doesn't take very long to screw up a company. Two, three months should do it. All it takes is some excess inventory, some negligence in collecting, and some ignorance about where you are.’
Source: Mary Baechler in Inc., October (1994) quoted in The Wiley Book of Business Quotations (1998), p. 86.
After completing this chapter you should be able to:
- Explain the nature and importance of sources of finance.
- Discuss the nature of short-term financing.
- Analyse the ways in which the long-term finance of a company may be provided.
- Understand the concept of the cost of capital.
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- Sources of finance are vital to the survival and growth of a business.
- There are internally and externally generated sources of finance.
- Sources of finance can be short-term or long-term.
- Short-term and long-term sources of finance are normally matched with current assets and long-term, infrastructure assets, respectively.
- Short-term internal sources of finance concern the more efficient use of cash, trade receivables and inventory.
- Techniques for the internal management of working capital involve the trade receivables ...