Working Capital Management

Categories: Accounting, BBA 4th Year 7c

Course Content

Chapter-1 Introduction to Working Capital Management:
Definition of Working Capital, Capital and Working Capital; Importance of Working Capital; Components of Working Capital; etc.

Class Brief

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Class-1 Requierements 1-6

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Class-2 Requirements 7-11

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Class-3 Requirements 12-15

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Chapter-2 Management of Cash and Marketable Securities:
a) Managing Cash Inflows and Outflows: Motives for Holding Cash and Marketable Securities - The Money Market - The Lockbox Location Problem - Cash Concentration Strategies - Disbursement Management. 62 b) Cash Forecasting: Need for Forecasting Cash - Types of Cash Forecasts - Items to be forecast - Methods of Financial Forecast - Sources of Uncertainties in Cash Forecasts - Hedging Cash Balance Uncertainties - Hedging via Interest Rate Futures and Option on Futures - Cash Budget. c) Models for the Management of Cash and Temporary Investments: Determining the Optimum Cash Balance - Baumol's EOQ Model - Miller - Orr Model - Beranek Model - Stone Model - Management of Cash and Temporary Investments in Practice - marketable Securities: Types and Criteria for Selecting Securities Effects of Inflation.

Chapter-3 Receivables Management and Credit Policies:
a) Terms of Sales Decisions: Grounds for Granting credit - Costs, Revenue and Credit Decisions - Terms of Sales Decisions - Standard Approach-Assessing Risk in Terms of Sale Decisions. b) Credit Granting Decisions: Analysing Credit Capacity of Customers - Information Costs and Credit Decisions - Credit Investigation - Credit granting - Credit Analysis - One period/Multi-period Credit Granting Decisions - uncertainty in Credit Granting Decisions - Credit Limits. c) Monitoring Accounts Receivables: Need for Monitoring Receivables - Tools for Monitoring Accounts Receivables - Investigating Payment Patterns - The Management of Accounts Receivables: Cost of Maintaining Receivables - Determinants of size of Receivables - Aging Receivables - Risk Class Approach-Risk Class in Receivables - Forecasting Receivables - Collection Policy: Factoring - Credit Insurance - Evaluation of changes in credit Policy.

Chapter-4 Inventory Management:
a) Objectives of carrying Inventory - Objectives of Inventory Management -Determinants of Inventory size - Alternatives to holding inventory Models-Reorder point - Safety Stock Approach to face Uncertainty-Effects of Inflation on Inventory Management - Role of Financial Manager in Inventory Management - Use of EOQ model in production planning. b) Uncertainty Approach: The Static Inventory Problem - Use of the option pricing Model - Use of NPV and its Co-efficient of variation - NPV with Risk-adjusted Discount Rates - Monitoring Inventory Balance.

Chapter-5 Management of Short-term Liabilities:
a) Introduction: Need for Short term financing - Sources of Short-term Financing - Calculating the Cost of a Source of Short Term Financing - the Sequential Method of Formulating a Structure of Current debts. b) The Integer Programming Approach to Structuring Current Debts: problems with the Sequential Approach - Integer programming and the structuring of current liabilities - Integer Programming and the Hedging of Cash Stockouts - Integer programming and the Hedging of Cash Stockouts - Integer Programming and Current Liabilities.

Chapter-6 Working Capital Management in the Public Sector Corporations:
Need for working capital in the Public Sector Corporations - Management of Working Capital in the Public Sector Corporations.

Chapter-7 Working Capital Management in an International Setting:
Need for International working capital - Sources of Risks - Hedging Risks - Management of International Working Capital Accounts - International Cash, Receivables and Inventory management - Inter-Company Funds flow mechanism.