A comprehensive primer for executives and managers on working capital management With limited access to credit and short term funding, it is increasingly important that companies focus on working capital management to free up funds and optimize liqidity. Written in the easy-to-follow Essentials Series style, Essentials of Working Capital Management covers the main components of working capital.
- Covers the latest trends around working capital
- Discusses a range of working capital topics, including cash management, banking relations, accounts receivable, inventory, accounts payable, and foreign exchange
- Analyzes the efficient utilization of current assets and liabilities of a business through each phase of the operating cycle
- Examines the planning, monitoring, and management of the company's collections, disbursements and concentration banking
- Explores the gathering and management of information and forecast data to effectively use funds and identify risk
Focused on how businesses can continue to be successful in these difficult times, specifically in relation to the limited credit available to businesses, this book puts practical guidance at your fingertips so you can put them to work right away. A comprehensive case introduces each major section of the book, and suggested solutions are included in a book appendix.
Table of Contents:
Preface xi
Acknowledgments xv
Chapter 1 Concepts in Working Capital Management 1
Working Capital Concepts 1
Ratio Analysis 7
Working Capital Ratios 7
Significance of Working Capital 12
Applying These Ideas to a Real Business 15
Summary 18
Part I Cash—Transactions, Banking and Credit, and Financial Instruments 19
Comprehensive Case: Widget Manufacturing Case I 19
Chapter 2 Cash: Management and Fraud Prevention 25
Forms of Cash 26
Lockboxing 30
Controlled Disbursement 34
Bank Products Used for Electronic Transactions 37
Summary
Chapter 3 Cash, Credit, and Short-Term Financial Instruments 43
Developing a Short-Term Forecast 44
Preparing a Cash Budget 45
Credit Financing 48
Short-Term Investments 54
Summary 59
Chapter 4 Concentration Banking and Financial Institution Relationships 61
Changing Financial Landscape 62
Bank Relationship Management 63
Concentration Banking 64
Request-for-Proposals 69
RFP Evaluation 75
Bank Relationship Reviews 78
Summary 80
Part II Other Working Capital Accounts— Receivables, Inventory, and Payables 81
Comprehensive Case: Widget Manufacturing Case II 81
Chapter 5 Accounts Receivable and Working Capital Issues 89
Elements of Receivables Management 90
Receivables Cycle Monitoring: Ratios 94
Receivables Cycle Monitoring: The Aging Schedule 96
Sales Financing 98
Credit Reporting 99
Terms of Sale 103
Invoice Generation 104
Asset-Based Financing: Receivables 107
Debt Collection Agencies 109
Summary 109
Chapter 6 Inventory and Working Capital Issues 111
Elements of Inventory Management 112
Inventory Cycle Monitoring: Ratios 113
Inventory Cycle Monitoring: Metrics 115
Purchasing 117
EOQ and JIT 122
Work-in-Process 124
Asset-Based Financing: Inventory 129
Summary 131
Chapter 7 Payables and Working Capital Issues 132
Elements of Payables Management 133
Payables Cycle Monitoring: Ratios 134
Accounts Payable Function 136
Payables Using Internal Processes 139
Payables Outsourcing 140
Payroll Alternatives 145
Summary 149
Part III Issues in Working Capital Management 151
Comprehensive Case: Widget Manufacturing Case III 151
Chapter 8 International Working Capital 155
Capitalism Goes Global 156
Elements of International Working Capital 157
Financing of International Transactions 158
Foreign Exchange Markets 160
Analysis of Country Risk 167
Other Significant Issues in International Working Capital 169
Cultural and Corporate Practices Affecting Working Capital 171
Summary 174
Chapter 9 Information and Working Capital 175
Information Technology 176
Bank Information Technology 178
Internet Bank Technology 182
Enterprise Resource Planning: An Alternative Approach 188
Choosing Working Capital Information Systems 191
Summary 197
Chapter 10 Managing the Working Capital Cycle 199
Risk and Working Capital 200
Enterprise Risk Management 202
Efficiency and Working Capital 204
Liquidity and Working Capital 207
Suggested Actions 210
Developments in Working Capital Management 215
The Cost of a Transaction 217
Summary 221
Appendix A: Suggested Solutions to Widget Manufacturing Company Case—Parts I, II, and III 223
Appendix B: Basic Financial Concepts 233
Appendix C: Web Sites of Working Capital Market Participants 238
Appendix D: Glossary 241
About the Author 262
Index 263
About the Author :
James S. Sagner Ph.D.?(White Plains, NY) is Adjunct Professor at the University of Bridgeport. He is former Senior Managing Principal of Sagner/Marks, a treasury management consulting firm with offices in White Plains NY. Prior to forming Sagner/Marks in 1992, Mr. Sagner was with the Consulting Services Division of the First National Bank of Chicago (now Bank One).?He has managed over 250 large-scale studies for companies and non-profit organizations worldwide. He is recognized as an expert in financial management and his clients have included leading insurance companies, securities firms, finance companies, banks, hospitals, manufacturing companies and service organizations.?He is the author of Cashflow Reengineering (1997) and Financial and Process Metrics for the New Economy (2001), and co-author of Essentials of Managing Corporate Cash (2003).
