Focus on: Financial Management—Module 44
FINANCIAL MANAGEMENT
Five functions:
Working Capital Management
- ICP = Average inventory / Cost of sales per day
- Average inventory = (Beginning inventory + Ending inventory) / 2
- Assume 365 days in a year unless told otherwise
- RCP = Average receivables / Credit sales per day
- PDP = Average payables / Purchases per day
- CCC = ICP + RCP – PDP
Cash Management
Cash balances are maintained by a firm for:
- Operations—To pay ordinary expenses
- Compensating balances—To receive various bank services, ...
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