I need one discussion and 3 responses to students works.
Student CBVU
StudentDiscussion-2.docxWorking capital management
Working capital management is a process every organization defines to observe how effectively the company is operating using its liabilities and assets (Megaladevi, P., & Subramaniam, A. S. 2018). Usually, working capital is defined as the difference between the current assets and the current liabilities of the company. It is important for an organization to calculate its working capital to make sure it has enough money for a short-term operating cost of the company (Megaladevi, P., & Subramaniam, A. S. 2018). We know for a fact that there are multiple components that contribute to the working capital management which include, The cash conversion cycle, inventory management, credit policies and the cash budget. In this discussion I will discuss more briefly about how the cash conversion cycle and the inventory management will help in making managerial decisions about the working capital.
The cash conversion cycle
The cash conversion cycle is a measurement in time which tells how long it can take a company to turn its resources and investments into inventory and which then could be sold to get some cash flow into the company (Tuner, J. A. 2016). It is important for an organization to calculate its cash conversion cycle because it can take managerial decisions on the working capital that the company can have to run the successfully and manage the operating costs based on it (Tuner, J. A. 2016).
Inventory management
Inventory weighs a lot in calculating the working capital of an organization. It is said that if the inventory is high, it means it has lot of risk in getting the cash flow for the company for its operation and if the value is low, the company has high liquidity of assets (Ranganatham G. 2014). So, the company should know how much sales have to be done to get the cash flowing for its successful operation. On the contrary, if the inventory is full and sales are less it indicates that the cash flow is less and cannot handle the operating cost of the company (Ranganatham G. 2014).
Reference
Megaladevi, P., & Subramaniam, A. S. (2018). A Study on Working Capital Management in Selected Cement Companies in India. ITIHAS - The Journal of Indian Management, 8(3), 9–13.
Ranganatham G. (2014). Inventory Management (IM) Practices in Small Scale Enterprises. BVIMR Management Edge, 7(2), 19–33.
