Principles of Managerial Finance, 15th Edition

15.1 Net Working Capital Fundamentals

1. LG1

The balance sheet provides information about the structure of a firm’s investments on the one hand and the structure of its financing sources on the other hand. In previous chapters we studied capital budgeting, which focuses on the long-term assets on the left-hand side of a firm’s balance sheet, and capital structure, which focuses on the long-term liabilities and equity on the balance sheet. In this chapter and the next we turn our focus to the choices that confront financial analysts as they manage the firm’s short-term assets and liabilities. As with all other financial decisions, the object is to manage current assets and liabilities in a way that maximizes the value of the firm.

Working Capital ...