�PAGE �1� Working Capital Concepts
Working Capital Management Concepts Worksheet
University of Phoenix
MBA550 week1
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Working Capital Management Concepts Worksheet
Concept | Application of Concept in the Simulation | Reference to Concept in Reading |
Short-term financing | "Lawrence Sports (LS) currently finances all cash flow shortages with a $1.2 million line of credit from central bank. The credit line allows LS to maintain a positive cash balance of $50,000. LS source its materials from Gartner Products and Murray Leather Works. The terms and credit with Gartner is 405 payment upon purchase and 60% in the following week. The terms with Murray are 15% payment upon purchase and 85% in the following week" (University of Phoenix, 2009). The financial manager specifies the forecaster cash requirements, interest rates, bank loans, accounts payables and credit limits. | "The cumulative capital requirement can be met either from long-term or short-term financing. When long-term financing does not cover the cumulative capital requirement, the firm must raise short-term capital to make up the difference." (Brealey, Myers, Allen, 2005) |
Examine effects of accounts payable terms on cash conversion cycle and costs of goods. collection policy terms of sale | "Lawrence set the terms of sale as 20% collection and sales and balance of 80% due the following week." (University of Phoenix, 2009). | Not all sales involve credit, you can demand cash on delivery (COD) and it may be sensible for you to demand cash on delivery. Most companies offer a cash discount for prompt payments on accounts, if payment is received within 30 days a 2% discount is applied. These terms are referred to as 2/10 net 30. (Brealey, Myers & Allen, 2005, pg 814) |
Accounts Receivables | "Lawrence Sports is a $20 million revenue company that manufactures and distributes sporting goods. Lawrence's principal customer is Mayo, which is the world's leading... | |
Nicely detailed
Though not as long as the other assignments yours is more concise about the topic and you don't waffle on. Good work and nice biblio!
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