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Working capital is the firms total investment in current assets. Working capital management
Working capital management includes the administration of each current assets accounts such as cash, marketable security , accounts receivable , and inventory etc . Working capital management concerns decision about a firms current assets and current liability
The decision are required to plan and control the flow of dollars among various working capital accounts and other balance sheet account to ensure adequate liquidity for the firms . Working capital decision are also required to establish and monitor appropriate levels in each working capital accounts to enhance the firms profitability working capital management involves decision about how these assets are finance.
KING OF FIRMS
THE VOLUME OF SALES THE VARIABILITY OF CASH FLOW THE LENGTH OF THE OPERAING CYCLE
Are high-risk high-return approaches to working capital management . Aggressive strategies include minimizing the month of liquid assets and maximizing the amount of shortterm debt used to finance them.
(3) An aggressive strategy having a small investment in current assets, $ 10,000 and large amount of short-term of short-term debts, $ 25,000.
Fixed assets are to remain at $ 50,000 through the year. The firms capital structure requires total liabilities to represent of total assets. Interest rates are expected to be 8 percent on short-term debt and 12 percent on long-term debt. The firm expects to earn 20 percent before interest and taxes (EBIT) on 80,000 in sales. The firm has a 34 percent .
Aggressive
MODERATATE STRATEGIES
Moderate strategies are moderate-risk and moderate return approaches to working capital management. Most firms follow moderate strategies in which they use intermediate levels of both current assets and current liabilities.