FIN 370 Week 3 DQ 1

FIN 370 Week 3 DQ 1 - accounts receivable and inventory....

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Discussion Question(s) #1 Please reply to this thread by or before Wednesday, day 2 with your answers! How would you define working capital? What could happen if an organization neglected to manage its working capital? What techniques would you recommend for your organization? Why? How would you define working capital? Working capital is a measure of an organizations short-term financial health. It is calculated by finding the difference between a company’s current assets and current liabilities. This is an important measure of a company’s liquidity and its ability to support day-to-day operations. Working Capital=Current Assets-Current Liabilities What could happen if an organization neglected to manage its working capital? If an organization neglects its working capital it would be at risk at having extreme short-term liquidity shortfalls. Too much working capital usually means that too much money is tied up in
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Unformatted text preview: accounts receivable and inventory. The company could have trouble paying back its creditors, it may have to cut inventory or worst-case scenario it could go bankrupt. What techniques would you recommend for your organization? Why? For my organization, I would try to ensure that the company is able to continue its operations and that it has sufficient cash flow to satisfy both maturing short-term debt and upcoming operational expenses. Our inventory is very important to the daily jobs and the cash that is being brought in on a daily basis. Just today, one of our customers claims they cannot find 47 cones we dropped off for traffic control. Better inventory control will reduce the investment in materials, minimize reordering costs, and increase cash flow. With the increased cash flow from proper inventory...
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