WORKING CAPITAL MANAGEMENT

A Written Report
Presented to the Faculty of the College of Business Administration
Polytechnic University of the Philippines
Sta. Mesa, Manila





In Partial Fulfillment of the Requirements for the Course
Bachelor of Science in Business Administration








by



Blanco, Nika
Caballero, Eileen
Cortez, Kevin
Ferrer, Nasser
Lago, Ryan
Paliza, Janno
Sunggayan, Jaspher



August 7, 2014



TABLE OF CONTENTS

I. Working Capital Management
(Nika Blanco & Kevin Cortez)
A. Cash Management.............................................
(Nasser Ferrer)
B. Receivable Management.....................................
(Eileen Caballero)
C. Inventory Management......................................
(Janno Paliza)
D. Current Liability Management.............................
(Ryan Lago & Jaspher Sunggayan)






I. Working Capital Management
Working capital, being the lifeblood of an organization, needs to be
efficiently and effectively managed so that the organization may optimize
its operations, maximize its growth potential, and attain its desired
financial position.

Working Capital Management Defined
Working capital management refers to the efficient and effective utilization
of working capital to attain predetermined objectives of an organization relative to
profitability of operations, liquidity of financial resources, and minimization of risks
and company costs. It may also defined as the administration and control of
current assets and current liabilities to maximize a firms value by achieving a
balance between profit and risk.
Trade-off between Profitability and Risk. In managing working capital,
there is a trade-off between in firms profitability and its risk. Too much working
capital can reduce the firms profitability because of additional financing charges
(or interest expense) and the opportunity cost of capital tied up in the firms
assets. On the other hand, inadequate working capital expenses the firm to the
risks of not being able to pay its bills as they fall due.

Working Capital Defined; Its Concepts
Working capital, is the difference between current assets and current
liabilities. In other words, it is the amount of current assets left after providing for
current liabilities. As such, it is the amount of current assets (or the aggregate
cash, marketable securities, receivables, inventories, prepaid expenses, and
other current asset items) financed by long-term capital (long-term debt and
stockholders equity) of the business. Thus, considering the above given
definitions, it is the amount of term capital that is made to revolve in conducting
operations and serves as the lifeblood of a company.
Concepts of Working Capital. The term working capital is generally used
to refer to the excess of current assets over current liabilities (or net current
assets). Sometimes it is used as referring to current assets. Under the latter
concept of the term, the difference between current assets and current liabilities
is referred to as net working capital.
In as much as working capital is the excess of current assets over current
liabilities, it must be equal to the amount of current assets financed by long term
sources of funds. In other words, currents assets provided by short-term sources
of funds do not affect working capital.

Relevance of Working Capital
A business concern uses working capital in conducting operations that is
in making goods and services available to customers and clients and in paying
for operating salaries (salaries, advertising, rentals, etc.) Working capital is made
to revolve from cash to inventories and services and then to receivables or
directly back to cash. Because of this, it is called the lifeblood of an organization.
Plant, property and equipment provide the structure.
At the start of business operations, working capital may be wholly in the
form of cash. In as much as it is made to revolve in conducting operations, at any
point in time of organizations existence, it would be partly in the form of cash,
receivables, inventories, prepaid expenses and other current asset items.
DUGTUNGAN TO.






B. Receivable Management
Receivable management refers to the formulation and administration of
plans and policies related to sales on account and ensuring the
maintenance of receivables at predetermined level and their
collectability as planned.

Objective of Receivable Management
The objective of receivable management is to maintain receivables at a
level that will result in a combination of turnover and profit rates that will
maximize the over-all return on investment in business entity. A high level of
receivables exposes a company greater risk from uncollectible accounts,
more financing charges and greater opportunity cost arising from the capital
tied up in receivables. On the other hand, a very low level of receivable may
have its adverse effects on sales volume and gross margin. This is because
longer credit terms attract more customers and the gross margin on credit
sales far exceeds that on cash sales.

Determinants of the Size of Receivables
The size of investment in receivables is affected by the following factors:
1. Terms of sale
2. Paying practices of customers
3. Collection of policies and practices
4. Volume of credit sales
5. Credit extension policies and practices
6. Cost of capital

GANITO PO YUNG FORMAT.