Essentials of Working Capital Management

by Sagner, James

• ISBN13: 9780470879986
• ISBN10: 047087998X
• Edition: 1st
• Format: Paperback
• Copyright: 2010-11-23
• Publisher: Wiley

Summary

The focus of this book is on businesses can continue to be successful in these difficult times, specifically in relation to the limited credit available to businesses along with other short term funds. Written in the easy-to-follow Essentials Series style, it covers the main components of working capital: The efficient utilization of current assets and current liabilities of a firm throughout each phase of the busi-ness operating cycle. The planning, monitoring, and manage-ment of the company's collections, disbursements and bank account balances. The management of receivables, inventories and payables to minimize investment in idle resources. The gathering and management of information and forecast data to ef-fectively use available funds and identify risk.

Author Biography

James S. Sagner, PhD, is Associate Professor in the School of Business at the University of Bridgeport and teaches in the executive education program at the University of North Carolina. In addition, he is Senior Managing Principal of Sagner/Marks, a working capital consulting firm. Dr. Sagner is the author of six previous books, including, as coauthor Essentials of Managing Corporate Cash (Wiley), as well as some fifty articles and papers on finance and economics. He is a former Rockefeller Foundation Fellow and is recognized as an expert in financial management, with clients that include leading insurance companies, securities firms, finance companies, banks, hospitals, manufacturing companies, and service organizations.

Table of Contents

Preface	p. xi
Acknowledgments	p. xv
Concepts in Working Capital Management	p. 1
Working Capital Concepts	p. 1
Ratio Analysis	p. 7
Working Capital Ratios	p. 7
Significance of Working Capital	p. 12
Applying These Ideas to a Real Business	p. 15
Summary	p. 18
Cash-Transactions, Banking and Credit, and Financial Instruments	p. 19
Comprehensive Case: Widget Manufacturing Case I	p. 19
Cash: Management and Fraud Prevention	p. 25
Forms of Cash	p. 26
Lockboxing	p. 30
Controlled Disbursement	p. 34
Bank Products Used for Electronic Transactions	p. 37
Summary	p. 42
Cash, Credit, and Short-Term Financial Instruments	p. 43
Developing a Short-Term Forecast	p. 44
Preparing a Cash Budget	p. 45
Credit Financing	p. 48
Short-Term Investments	p. 54
Summary	p. 59
Concentration Banking and Financial Institution Relationships	p. 61
Changing Financial Landscape	p. 62
Bank Relationship Management	p. 63
Concentration Banking	p. 64
Request-for-Proposals	p. 69
RFP Evaluation	p. 75
Bank Relationship Reviews	p. 78
Summary	p. 80
Other Working Capital Accounts-Receivables, Inventory, and Payables	p. 81
Comprehensive Case: Widget Manufacturing Case II	p. 81
Accounts Receivable and Working Capital Issues	p. 89
Elements of Receivables Management	p. 90
Receivables Cycle Monitoring: Ratios	p. 94
Receivables Cycle Monitoring: The Aging Schedule	p. 96
Sales Financing	p. 98
Credit Reporting	p. 99
Terms of Sale	p. 103
Invoice Generation	p. 104
Asset-Based Financing: Receivables	p. 107
Debt Collection Agencies	p. 109
Summary	p. 109
Inventory and Working Capital Issues	p. 111
Elements of Inventory Management	p. 112
Inventory Cycle Monitoring: Ratios	p. 113
Inventory Cycle Monitoring: Metrics	p. 115
Purchasing	p. 117
EOQ and JIT	p. 122
Work-in-Process	p. 124
Asset-Based Financing: Inventory	p. 129
Summary	p. 131
Payables and Working Capital Issues	p. 132
Elements of Payables Management	p. 133
Payables Cycle Monitoring: Ratios	p. 134
Accounts Payable Function	p. 136
Payables Using Internal Processes	p. 139
Payables Outsourcing	p. 140
Payroll Alternatives	p. 145
Summary	p. 149
Issues in Working Capital Management	p. 151
Comprehensive Case: Widget Manufacturing Case III	p. 151
International Working Capital	p. 155
Capitalism Goes Global	p. 156
Elements of International Working Capital	p. 157
Financing of International Transactions	p. 158
Foreign Exchange Markets	p. 160
Analysis of Country Risk	p. 167
Other Significant Issues in International Working Capital	p. 169
Cultural and Corporate Practices Affecting Working Capital	p. 171
Summary	p. 174
Information and Working Capital	p. 175
Information Technology	p. 176
Bank Information Technology	p. 178
Internet Bank Technology	p. 182
Enterprise Resource Planning: An Alternative Approach	p. 188
Choosing Working Capital Information Systems	p. 191
Summary	p. 197
Managing the Working Capital Cycle	p. 199
Risk and Working Capital	p. 200
Enterprise Risk Management	p. 202
Efficiency and Working Capital	p. 204
Liquidity and Working Capital	p. 207
Suggested Actions	p. 210
Developments in Working Capital Management	p. 215
The Cost of a Transaction	p. 217
Summary	p. 221
Suggested Solutions to Widget Manufacturing Company Case-Parts I, II, and III	p. 223
Basic Financial Concepts	p. 233
Web Sites of Working Capital Market Participants	p. 238
Glossary	p. 241
About the Author	p. 262
Index	p. 263
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