Working Capital Management Concepts Worksheet
Concept Application of Concept in the Simulation Reference to Concept in Reading
Working Capital In the working capital management simulation, the management of the
working capital included mostly the management of collections and loan repayment.
Short-term, or current, assets and liabilities are collectively known as working capital
(Brealey, Myers, & Allen, 2005)
Cash inflows and Cash outflows In the working capital management simulation, some of
the cash inflows included collecting outstanding receivables from the business partners.
Some of the outflows included operating expenses and accounts payable. Cash inflows
come from collections on accounts receivables. Cash outflows are condensed into four
categories: payments on accounts payable, operating expenses, capital expenditures, taxes,
interest, and dividend payments (Brealey, Myers, & Allen, 2005)
Terms of Sale In the working capital management simulation, Lawrence has terms of sale
set up with its business partners to pay a certain percentage at the time of the sale and pay
the rest the following week. Terms of sale are the individual practices that a firm has for
transactions that involve credit. (Brealey, Myers, & Allen, 2005)
Commitment In the working capital management simulation, Lawrence has a line of credit
with Central Bank with a limit of $1.2 million. The interest rate increases depending on the
amount borrowed. Lawrence repays the loan during the last week of each month, after