06 BSIS 2 Financial Management Week 12 13
06 BSIS 2 Financial Management Week 12 13
06 BSIS 2 Financial Management Week 12 13
Objectives:
Direction: Identify whether the following accounts is Current Asset (CA) or Current Liability (CL).
How was activity above? I hope you enjoyed answering it. Before we proceed with our lesson I want
you to ask yourself the following questions.
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A. Working Capital Management
Current assets include inventory, accounts receivable, marketable securities, and cash.
Working Capital is the difference of total current assets and total current liabilities. It is
analyzed as the ability to meet current obligations as they come due using current ratio analysis.
However, the use of current ratio must be made with care and caution. A good current ratio may
only imply liquidity position, but this may not be absolutely true. Careful and deeper analysis on
the composition of the current assets must be made. Example would be the inclusion of old
accounts receivable and non-moving inventories.
Effective management of working capital will improve the firm’s overall return on
investment performance. Usually, the firm’s goal is to minimize net working capital. This could
be achieved by:
Working capital investments are made to support day-to-day operations and sales
activities. These include:
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5. The amount of securities or temporary investments to be made.
Source: https://www.racmacs.com/
D. Objectives of Working Capital Management
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The management is to ensure that the firm has adequate working capital to run its business
operations smoothly. It should have neither excess working capital nor inadequate working
capital.
F. Cash Management
Cash is a “non-earning” asset in the sense that cash itself or commercial checking account earns
no interest or very little interest. It is needed to pay for labor, raw materials, taxes, debts, or
dividends and to buy fixed assets.
Cash Management refers to the most effective way of handling cash or its equivalent, in manner
intended to result in its most efficient use.
Some important cash management issues that a financial officer must always have in mind are:
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Good morning. How was the lesson yesterday? I hope you enjoyed the lesson. Today, I am encouraging
you to review your notes. After reviewing, answer the activity below.
________________1. It refers to the administration and control of the more liquid resources to make
sure that they are sufficient to cover day to day business operations including anticipated contingencies.
________________2. It is the difference of total current assets and total current liabilities.
________________3. It refers to the most effective way of handling cash or its equivalent, in manner
intended to result in its most efficient use.
Congratulations! I am happy that you were able to finish our module on Working
Capital and Cash Management. Now I am encouraging you to share with me, what is your most
favorite part of this module? Your answer will help me improve the module for our next topic. Please
write your answer on the space provided.
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REMINDERS:
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