İŞLETME FİNANSI I

Working capital is also defined as the available capital for day-to-day production of goods to be sold by a company represented by its net current assets

Accounts payable belongs to current liabilities.

All of them are the dimensions of working capital management.

Only two of them can be motivations of holding cash which are transaction and precautionary motives.

Conservative policy of working capital management creates the lowest level of risk.

While the conservative policy of working capital management creates the lowest level of risk, it fails to ensure optimum utilization of funds.

In the formulation all of them are used.

Transaction cost is mainly cash-related cost. Inventories have nothing to do with it.

Delinquency cost is a type of cost arises on account in relation with the delay in payment of receivables by the customer when they fall due and become doubtful debts.

Corporate bonds are long term credit source, thus cant be considered as financing source of working capital.

Accounts Receivable is a component of "Current Assets".

Prepaid Expenses are a component of current assets

Volume of business: Generally, there exists a strong positive relationship between the size of the company and the working capital needs.

Working capital management has the following four dimensions:Growth, Credibility, Investment,Time

As the name implies, conservative policy aims to minimize the risks associated with the financing of the current assets. It proposes to finance a higher proportion of current assets by the long- term sources.

Aggressive policy, as the name suggests, is specified as the most risky working capital financing policy as a higher proportion of current assets including permanent ones is financed by the short-term debt. To apply such a policy, the company should ensure that the receivables are supposed to be collected on time and payments to the creditors are easily made as late as possible.

Under the framework of cash management, the operating cycle is defined as the length of time it takes the inventories are sold and the proceedings are collected in cash from customers.

Inventory management aims to keep the inventories on optimal level, without stock- outs and excesses, by organizing, holding and replenishments for each item.

Holding (or Carrying) Costs: This broad category includes the costs for storage facilities, handling, insurance, pilferage, breakage, obsolescence, depreciation, taxes, and the opportunity cost of capital.

Delinquency Cost: This type of cost arises on account in relation with the delay in payment of receivables by the customer when they fall due and become doubtful debts.