ADMN 4300H Lecture Notes - Lecture 10: Accounts Payable, Current Liability, Accounts Receivable
30 Mar 2020
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Tracing cash and net working capital: current assets are cash and other assets that are expected to be converted to cash with the year, cash, marketable securities, accounts receivable. Inventory: current liabilities are obligations that are expected to require cash payment within the year, accounts payable, accrued wages, taxes. Defining cash in terms of other elements: cash = long-term debt + equity net working capital (excluding cash) . The operating cycle and the cash cycle: cash cycle = operating cycle accounts payable period. In practice, the inventory period, the accounts receivable period, and the accounts payable period are measured by days in inventory, days in receivables, and days in payables. Interpreting the cash cycle: the cash cycle increases as the inventory and receivables periods get longer, the cash cycle decreases if the company is able to stall payment of payables by lengthening the payables period.
