Ch 4 · Working Capital Management

5 concept points · 4 formulas · 4 exam-critical points.

📘 Core concepts

• 1WC = Current Assets − Current Liabilities; gross WC = total CA.
• 2Operating cycle = Inventory days + Debtors days − Creditors days.
• 3Approaches: Conservative (high WC, low risk), Aggressive (low WC, high risk), Matching/Hedging.
• 4Receivables management: credit policy (terms, period, standards, collection).
• 5Cash management: Baumol model (transaction motive), Miller-Orr model (random cash flow).