WORKING CAPITAL MANAGEMENT -funds for day-to-day operations -liquid and short term CAPITAL EXPENDITURES -funds

for capital asset acquisitions -long-term investments Relationships of WC and CAPEX -Cash flow relationship -Timing of Cash Flow Framework for Managing WC -cost-benefiit -risk-return Components of WC -Cash -Accounts Receivable -Inventories -Short-term Liabilities (Short Term Financing) Factors to consider in WC -Liquidity -Risk (credit risk, market risk, obsolescence) -Cost of WC -Return -Financing Measurements Current Ratio Operating Cycle (DSO + Stocking Period) Two Types of Managing WC Conservative: High level of WC Aggressive: Maintain low level of WC, but Inventories and Receivables are low Just in Time Vendor Management Cycle Faster Receivable Turnover: discounts, auto debit Maintaining minimum balances of cash, receivables and inventories (considering cost, risk, return) What should be the Minimum Balances? Cash Accounts Receivables Inventories Matching Principle (Short-term to Short-Term) Financing WC Daily Sales and Collections Front-Ended Payments, Down payments Profits Debt Capital (long-term--->expensive) Equity Capital

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