CHAPTER 8
WORKING CAPITAL MANAGEMENT
LEARNING OUTCOMES
After completing this chapter, you will be able to do the following:
- Describe primary sources of liquidity and factors that influence a company’s liquidity position.
- Compare a company’s liquidity measures with those of peer companies.
- Evaluate working capital effectiveness of a company based on its operating and cash conversion cycles, and compare the company’s effectiveness with that of peer companies.
- Explain the effect of different types of cash flows on a company’s net daily cash position.
- Identify and evaluate the necessary tools to use in managing a company’s net daily cash position.
- Calculate and interpret comparable yields on various securities, compare portfolio returns against a standard benchmark, and evaluate a company’s short-term investment policy guidelines.
- Evaluate a company’s management of accounts receivable, inventory, and accounts payable over time and compared to peer companies.
- Evaluate the choices of short-term funding available to a company and recommend a financing method.
SUMMARY OVERVIEW
- Understanding how to evaluate a company’s liquidity position.
- Calculating and interpreting operating and cash conversion cycles.
- Evaluating overall working capital effectiveness of a company and comparing it with other peer companies.
- Identifying the components of a cash forecast to be able to prepare a short-term (i.e., up to one year) cash forecast.
- Understanding the common types of short-term investments, ...
