The Working Capital Management
Submitted by:
De Guzman, Michelle G.
Submitted to:
Ms. Allauigan, Cristy
Working Capital Management refers to the way managers use short-term financing,
different forms of current assets such as cash, cash equivalents, accounts receivable, inventory
and prepaid expenses. Current assets are a must have for any business managers should
remember that there are costs used associated with them. If the company can reduce its current
assets without hurting the sales this will definitely increase profitability. Net working capital is
slightly different it involves subtracting the sum of payables and accruals to the current assets to
arrive to the amount of money that the firm must obtain from not free sources to carry its current
asset. Think it this way instead of borrowing money from a bank you can just purchase an
inventory from suppliers on credit the account is referred to as Accounts payable but this are
considered free in the sense that they don’t pay interest, so net working capital is the difference
between current assets and accounts payable. Cash conversion cycle it measures the length of
time the firms purchase or produce inventory, hold it for a time and sell it and receive cash. To
calculate the targeted Cash conversion cycle you need to figure out three things usually with the
help of financial statement first you need to determine your payables deferral period or the
average length of time between the purchase of materials to labor. Next you need to know your
