文档介绍：CHAPTER 16 Managing Current Assets
CHAPTER 16
Managing Current Assets
Alternative working capital policies
Cash management
Inventory management
Accounts receivable management
Definitions
Gross W1>.C.: Total current assets.
Net .: Current assets – Current liabilities.
. Policy: Decisions as to (1) the level of each type of current asset, and (2) how current assets will be financed.
. Management: Controlling cash, inventories, and A/R, plus S-T liability management.
SKI appears to have large amounts of working capital given its level of sales.
Selected Ratios--SKI Inc.
SKI Industry
Current
Quick 7>
Debt/Assets % %
Turnover of cash & securities
DSO (days)
Inv. turnover
F. A. turnover
T. A. turnover
Profit margin % %
ROE % %
How does SKI’s working capital pare with the industry?
Working capital policy is reflected in current ratio, quick ratio, turnover of cash and securities, inventory turnover, and DSO.
These ratios indicate SKI has large amounts of working capital relative to its level of sales. SKI is either very conservative or inefficient.
Is SKI inefficient or just conservative?
A conservative (relaxed) policy may be appropriate if it leads to greater profitability.
However, SKI is not as profitable as the average firm