Ellis also discovered that medtronic itself was

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Unformatted text preview: asis,” Ellis says. Ellis also discovered that Medtronic itself was paying bills too promptly. Medtronic subsequently sought and received, from its vendors, longer payment terms and discounts for early payment. The company invests the extra cash generated by more efficient management of its current assets and accounts payable in fixed-income instruments with an average duration of a year. Clearly, managing a business’s current assets is a very complex process. In this chapter we look at techniques and strategies for managing working capital and current assets. We first discuss the fundamentals of net working capital and then demonstrate the cash conversion cycle. The balance of the chapter considers the management of inventory, accounts receivable, and receipts and disbursements in the context of the cash conversion cycle. M 597 598 PART 5 LG1 Short-Term Financial Decisions 14.1 Net Working Capital Fundamentals short-term financial management Management of current assets and current liabilities. The firm’s balance sheet provides information about the structure of a firm’s investments on the one hand and the structure of its financing s...
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