LEARNING ACTIVITY SHEET

Grade Level/ Subject Grade 12 - BUSINESS FINANCE Quarter 1

Topic WORKING CAPITAL MANAGEMENT Week 4

MELC Explain tools in managing cash, Competency 6

receivables, and inventory.

Specific Objectives Apply the tools used in managing cash, Duration 2 hours
receivables, and inventories.
Score

I. Let’s Know

Components of Working Capital Management:

Working capital management has several main components. These are as follows: cash,
inventory, accounts receivable, trade credits, marketable securities, loans payable, and
Insurances. Examples are as follows:

1. Cash / Money: It is the most liquid form of asset. It is one of the most important parts of
working capital. Maintenance of the optimum level of cash in hand is important for every
organization. Cash acts as an effective tool at many stages of the product life cycle. Cash in
hand plays an important role to balance any spaces arising between productions to the
distribution cycle.
Tools for Cash Management
A. Cash Flow Statement
It gives you an idea of your cash situation at a point in time. It is usually prepared at
the end of every month, and it gives you a snapshot of the incoming and outgoing
cash. Cash that gets into your business can include profits, financing, or other income
streams. Outgoing cash may include your bills, payroll, inventory, costs, and debt.
B. Cash Flow Forecast
The cash flow forecast provides information on the future business condition and
estimated profitability of the company in a month, quarter, or year. It is an important
tool that can help the company predict problems before they occur and take steps to
mitigate them. The actual cash flow statement can provide cash flow forecast
information. The important information to include are sales estimations, inventory
plans, customer payments, and other expenses patterns.

2. Account Receivables are profits for collection which is owed to a business by their
customers for the sale of goods. Timely and efficiently collection of accounts receivable is
very necessary to maintain an excellent financial status to the operation of the company.
Accounts receivable are always reflected in the assets side of a company’s balance
sheet, but they are not assets until these are collected.
Tools for better management of your Accounts Receivables.
A. Evaluate Financial and Credit History
Do a background check first on their financial and credit history before agreeing to
do business with any company. Ask for feedback from other companies they have
previously done business with, if necessary. Some businesses already have histories
of long credit problem issues, which is a good indicator that they may already be
struggling with their company’s finances. With companies that have bad credit
histories, consider offering them special payment terms and conditions that are
favorable for them, and still generating profit to your company.

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 B. Set Clear Payment Terms
Set clear terms of payment between your client and your company. Send notice to
your client estimates of expenses limitation and set clear payment arrangements that
would be convenient for them - which will not sacrifice your business’ profit.
C. Do Electronic Invoicing
Use technology to send invoices by email through apps made available on the
internet. Send invoices as soon as the projects are completed. Prompt notices of due
payments can help clients prepare for the payment deadlines. Electronic Invoicing
apps sets as indicators that reflect when customers have opened the email, making
it more difficult for them to make excuses for late payments.
D. Provide Multiple Payment Methods
Suggest payment options to business payment systems other than GCash, PayPal,
or Credit Cards. Customers may use other options electronic funds transfer
system or bank-to-bank method of payment much more accessible.

3. Inventory. It is one of the main components of working capital. These are business assets
intended for sale. The growth at which business sells and restocks is important to achieve
its success. Inventories are of various types, which include raw materials, work in process,
or finished goods. Stakeholders consider an increase in stock turnover level as a sign of
the strong sales and as a measure of how strong the business looks in their buying as well
as the production process. Inventory that has a low turnover level, puts the company into
danger level of getting low product sales. Extra excessive-high stock levels indicate
inefficient use of working capital.
Tools for Inventory Management
A. Barcode data collection
The perpetual inventory system is very useful for on time and accuracy reporting.
Manual reporting can cause delays, errors, missing transactions, and undue burden
on the workforce to collect and enter the data. Automated data collection such as
barcode scans removes heavy reporting burden and largely improve accuracy and
timeliness actions.
B. Cycle counting
Inventory accuracy is very useful to the effective planning and control of inventory.
Physical inventory count was replaced by Cycle Counting due to the heavy and
inaccuracy of periodic inventory. With a regular program of counting, selected
important items are counted as compared to less important ones. The advantages
of cycle counting are: it provides a framework for checking and removing location
errors and it improves accuracy in an appropriate way.
C. ABC analysis
Cycle counting is usually preferred using ABC analysis to identify the more important
and less important items/inventories. The most common ABC analysis method is to
rank all inventory items according to the total value of each on an annual basis.
D. Lot tracking and traceability
More businesses are managing the collection of inventory data in recognition of the
increased risk of product recalls. Basic business management processes require
inventory tracking for financial control. It is a valuable tool for performance
improvement, better customer service, cost control, product development, and
overall company performance and success.

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 II. Let’s Perform and Practice

Multiple Choice: Encircle the letter of the correct answer.

1. It is the most liquid form of asset.
A. inventory
B. cash
C. accounts receivables
D. land and building
2. These are profits for collection which is owed to a business by their customers for the sale
of goods.
A. inventory
B. cash in the bank
C. accounts receivables
D. land and building
3. Which is of the following is not included in the basic types of inventory?
A. raw materials
B. work-in-process
C. finished goods
D. capital goods
4. It is used as a sign of sales strength and as a measure of how strong the business looks in
inventory purchases as well as production process.
A. increased purchases
B. increased cost of sales
C. increased stock turnover level
D. increased work in process
5. Accounts receivables are always reflected in the balance sheet as _________.
A. income
B. expense
C. asset
D. liability
6. These are business assets intended for sale.
A. inventory
B. cash
C. accounts receivable
D. raw materials
7. Working capital includes the following, except_____.
A. cash
B. accounts receivable
C. inventory
D. property, plant, and equipment
8. Maintenance of______________ level of cash in hand is important for every organization.
A. maximum
B. minimum
C. optimum
D. budgeted
9. Which of the following is NOT an example of accounts receivable?
A. services rendered to client paid in cash
B. goods sold to clients paid in credit card.
C. goods sold to clients paid in bank check.
D. All of the above.

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 III. Let’s Connect and Analyze

Definition and Enumeration:

1. Briefly describe Cash and enumerate the Two Tools for Cash Management.

2. Briefly describe Accounts Receivables and enumerate the 4 Tools for Accounts Receivables
Management.

3. Briefly describe Inventory and enumerate the 4 Tools for Inventory Management.

IV. Let’s Answer

Multiple Choice: Encircle the letter of the correct answer.

1. Which of the following is the tool used in cash management?
A. cash barcode collection
B. cash ABC analysis
C. cash clear payment terms
D. cash flow statement

2. Which of the following is the tool used for receivables management?

A. receivable barcode collection
B. receivable ABC analysis
C. cash flow statement
D. receivable flow statement

3. Which of the following is the tool used for inventory management?

A. Inventory barcode data collection
B. Inventory ABC analysis
C. Inventory electronic invoicing
D. Inventory flow statement
4. An important tool that can help the company predict problems before they occur and take
steps to mitigate them.
A. cash flow program
B. cash flow statement
C. cash flow budget
D. cash flow forecast
5. It is usually prepared at the end of every month, and it gives you a snapshot of the
incoming and outgoing cash.
A. cash flow program
B. cash flow statement
C. cash flow budget
D. cash flow forecast

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 V. Let’s Explore and Let’s Create

Answer the question and your answer will be graded based on the attached rubric.

Based on your own understanding, explain the tools in managing cash, receivables,
and inventory.

RUBRIC

SCORE 4 3 2 1
MAIN IDEA Clearly presents There is the main Vague sense of No main
the main idea and idea supported the main idea. idea.
support it throughout most
throughout the of the assignment.
assignment.
CONTENT The topic is well The subject is well The idea is Content is
presented, presented, present but the not sound.
developed, and however lacks content is not
supported with evidence and sound and solid.
specific evidence facts. Only few pieces
and facts. of evidence were
presented.
ORGANIZATION All paragraphs Most paragraphs Some The
have clear ideas have clear ideas paragraphs have paragraphs
with smooth but lack good clear ideas but lack clear
transitions. transitions. transitions are ideas.
weak.
FOCUS The purpose is Not clearly stated Shows limited No
clear. the aim of the awareness of the awareness.
discussion. purpose of the
discussion.

Writer Editor
Joseph Omar S. Apolinar Maria Elisa B. Valde
SHS Teacher II SHS Teacher III
Daniel R. Aguinaldo NHS F.Bustamante NHS

Evaluator
MAY ANN V. NABLE
Teacher III
Daniel R. Aguinaldo National High School

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 ANSWER KEY

II. Let’s Perform and Practice

1. B 2. C 3. D 4. C 5. C 6. A 7. D 8. B 9. D

III. Let’s Connect and Analyze

1. Cash / Money: It is the most liquid form of asset. It acts as an effective tool at many stages
of the product life cycle.
Tools for Cash Management
A. Cash Flow Statement
B. Cash Flow Forecast

2. Account Receivables are profits for collection which is owed to a business by their
customers for the sale of goods.
Tools for better management of your Accounts Receivables.
A. Evaluate Financial and Credit History
B. Set Clear Payment Terms
C. Do Electronic Invoicing
D. Provide Multiple Payment Methods

3. Inventory. These are business assets intended for sale.

Tools for Inventory Management
A. Barcode data collection
B. Cycle counting
C. ABC analysis
D. Lot tracking and traceability

IV. Let’s Answer

1. D 2. C 3. A 4. D 5. B

V. Let’s Explore and Let’s Create

The following should be checked on their answers:

1. Explanation on the tools in managing cash.

2. Explanation on the tools on receivables.
3. Explanation on the tools on inventory.