Debtor And Working Capital Management

Category: Debtor And Working Capital Management

Course Objectives

On completion of this course you should be able to:

  • Distinguish between the internal working capital management function and an external interpretation of a firm’s working capital position revealed by its published accounts, Calculate the working capital operating cycle and financing cycle from published accounting data and analyse the inter-relationships between the two,
  • Define the dynamics of a company’s credit-related funds system,
  • Explain how the terms of sale, which comprise the credit period, cash discount and discount period, affect the demand for a firm’s goods and services,
  • Understand the impact of alternative credit policies on the revenues and costs, which are associated with a capital budgeting decision,
  • Appreciate the disparities between the theory and practice of working capital management, given our normative wealth maximisation assumption.

Course Outline

  • The Objectives and Structure of Working Capital Management
  • The Objectives of Working Capital Management
  • The Structure of Working Capital
  • The Accounting Notion of Solvency
  • Liquidity and Accounting Profitability
  • Financial Interpretation: An Overview
  • Liquidity and Turnover
  • The Working Capital Cycle
  • Operating Efficiency
  • Real World Considerations
  • The Credit Related Funds System
  • The Effective Credit Price and Decision to Discount

    • The Effective Credit Price
    • The Effective Discount Price
    • The Decision to Discount

    The Opportunity Cost of Capital and Credit Related Funds System

    • The Opportunity Cost of Capital Rate
    • The Credit Related Fund System
    • The Development of Theory

    The Strategic Impact of Alternative Credit Policies on Working Capital and Company Profitability

    • Effective Prices and the Creditor Firm
    • Alternative Credit Policies, Working Capital Investment and Corporate Profitability

    Empirical Evidence and Theoretical Review

    • The Theory
    • The Empirical Evidence
    • Late Payments and the Case for Legislation