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Fundamentals of Corporate Finance by Robert Parrino

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12

Working Capital Management

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Learning Objectives

images Define net working capital, discuss the importance of working capital management, and compute a firm's net working capital.

images Define the operating and cash conversion cycles, explain how are they used, and compute their values for a firm.

images Discuss the relative advantages and disadvantages of pursuing (1) flexible and (2) restrictive current asset management strategies.

images Explain how accounts receivable are created and managed, and compute the cost of trade credit.

images Explain the trade-off between carrying costs and reorder costs, and compute the economic order quantity for a firm's inventory orders.

images Define cash collection time, discuss how a firm can minimize this time, and compute the economic costs and benefits of a lockbox.

Describe three ...

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