Working Capital Management

Course Code: FIN 321

Credit Hour: 3

Course Group: Specialization Courses: Finance

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Introduction: concepts of working capital, types of working capital: net gross, permanent or temporary concept of working capital, importance of working capital, definition of working capital management.

Management of cash and marketable securities: a) Managing cash flow and outflows: motives of holding cash and marketable securities, the money market, cash concentration strategies b)Cash forecasting; need for forecasting cash, types of cash forecasts, items to be forecast, methods of financial forecast c) Model of managing cash and temporary investments: determining the optimum cash balance, management of cash and temporary investment.

Resembles management and credit policies: a) Terms and sales decisions: ground of granting credit cost, revenue and credit decision b) Credit granting decision: analyzing credit capacity for customer, information costs and credit decision c) Monitoring accounts receivables: need and tools for monitoring accounts receivables.

Inventory management: Certainty approach: objectives of carrying inventory, objectives of inventory management, alternatives of holding inventory model.

Management of Short-term Liabilities: a) Introduction: Need for Short-term financing - Sources of Short-term Financing - Calculating the Cost of a Source of Short-Term Financing - the Sequential Method of Formulating a Structure of Current debts. b) The Integer Programming Approach to Structuring Current Debts: problems with the Sequential Approach - Integer programming and the structuring of current liabilities-Integer Programming and the Hedging of Cash Stock outs - Integer Programming and the Hedging of Cash Stock outs - Integer Programming and Current Liabilities.

Estimation of Working Capital: Working Capital Cycle - Determination of the Level of Working Capital Requirement.

Financing of Working Capital: Alternative Strategies for Financing Working Capital - Matching Approach - Conservative Approach -Aggressive Approach - Highly Aggressive Policy - Sources of Working Capital Finance.

Working Capital Management in an International Setting: Need for International working capital - Sources of Risks - Hedging Risks - Management of International Working Capital Accounts - International Cash. Receivables and Inventory management -Inter-Company Funds flow mechanism.

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Recommended Books:

Scherr, F.C., Modern Working Capital Management: Text & Cases (Prentice-Hall).

Hampton, Working Capital Management (John Wiley & Sons).

Hale, Credit Analysis - A Complete Guide (John Wiley & Sons).

Edwards, Effective Credit Management (Prentice-Hall).

Weston and Brigham, Essentials of Managerial Finance (Holt & Dry den)