Essentials of Financial Management, 5th Edition by Pearson

CHAPTER 14

Working Capital Principles

LEARNING OBJECTIVES

• Explain the gross and net concepts of working capital and their importance.
• Calculate working capital operating cycle of a firm with an example.
• Discuss permanent and variable working capital and the need for balanced working capital.
• Explain the factors that a finance manager should consider as determinants of working capital.
• Describe the issues of liquidity versus profitability and cost trade-off in managing working capital.
• Illustrate the estimation of working capital requirement for a manufacturing company.
• Suggest a plan for financing the working capital of a firm.

INTRODUCTION

So far we have discussed the management of fixed assets and long-term financing. In this part, ...