This free book provides a series of Exercises that support the author’s critique of working capital management and the pivotal role of debtor policy presented in his previous bookboon texts. The accounting convention that management must present an image of solvency and liquidity to the outside world by maintaining an excess of current assets over current liabilities is rejected. A firm’s objective should be to minimise current assets and maximise current liabilities compatible with its debt paying ability, based on future cash profitability dictated by optimum terms of sale, which may be unique.
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Working Capital and Debtor Management: Exercises
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- Part One: An Introduction
- An Overview
- Introduction
- Working Capital Management
- Strategic Debtor Management
- Exercise 1: The Terms of Sale
- Summary and Conclusions
- Selected References
- Part Two: Working Capital Management
- The Objectives and Structure of Working Capital Management
- Introduction
- Exercise 2.1: Financial Strategy: An Overview
- Exercise 2.2: Financial Strategy and Working Capital
- Summary and Conclusions
- Selected References
- Part Two: Working Capital Management
- The Accounting Concept of Working Capital Management: A Critique
- Introduction
- Exercise 3.1: Working Capital Investment and Risk
- Exercise 3.2: Working Capital Finance and Risk
- Summary and Conclusions
- Selected References
- Part Two: Working Capital Management
- The Working Capital Cycle and Operating Efficiency
- Introduction
- The Case Study: An Introduction
- The Case Study: The Analysis
- Summary and Conclusions
- Selected References
- Part Two: Working Capital Management
- Real World Considerations and the Credit Related Funds System
- Introduction
- Exercise 5: Real World Solvency and Liquidity
- Summary and Conclusions
- Selected References
- Part Three: Strategic Debtor Investment
- The Effective Credit Price and Decision to Discount
- Introduction
- Exercise 6.1: Terms of Sale: A Theoretical Overview
- Exercise 6.2: The Decision to Discount
- Exercise 6.3: The Effective Price Framework
- Exercise 6.4: “The Real” Cost of Trade Credit
- Summary and Conclusions
- Part Four: Summary and Conclusions
- Review Exercises
- Introduction
- Exercise 7.1: Working Capital: A Review
- Exercise 7.2: Cash Flow and the Budgeting Process
- Exercise 7.3: Cash Flow and Accounting Profit
- Exercise 7.4: The Preparation of a Cash Budget
- Exercise 7.5: Terms of Sale: A Review
- Summary and Conclusions
- Selected References
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