14
Working Capital Management
HolgerBurmeister/Alamy
Learning Objectives
Define net working capital, discuss the importance of working capital management, and compute a firm's net working capital.
Define the operating and cash conversion cycles, explain how are they used, and compute their values for a firm.
Discuss the relative advantages and disadvantages of pursuing (1) flexible and (2) restrictive current asset management strategies.
Explain how accounts receivable are created and managed, and compute the cost of trade credit.
Explain the trade-off between carrying costs and reorder costs, and compute the economic order quantity for a firm's inventory orders.
Define cash collection time, discuss how a firm can minimize this time, and compute the economic costs and benefits of a lockbox. ...
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