Management and Organizational Studies 2310A/B Chapter Notes - Chapter 18: Inventory Turnover, Current Asset, Current Liability

• School: Western University
• Department: Management and Organizational Studies
• Course: Management and Organizational Studies 2310A/B
• Professor: Shang Tang

Document Summary

Tracing cash and net working capital: sources- activities that increase cash. Increasing long-term debt, equity or current liabilities: decreasing current assets other than cash or fixed assets, uses- activities that decrease cash, decreasing long-term debt, equity or current liabilities. Increasing current assets other than cash or fixed assets. The operating cycle and the cash cycle: the operating cycle, operating cycle- time between purchasing the inventory and collecting the cash. Inventory period- time required to purchase and sell the inventory. Some aspects of short-term financial policy: short-term financial policy adopted by a firm is reflected in at least 2 ways, size of investments in current assets. Flexible policy- maintain a high ratio of current assets to sales: restrictive policy- maintain a low ratio of current assets to sales, financing of current assets. Short-term financial policies are costly in that they require a greater investment in cash and marketable securities, inventory.