Chapter 10 Managing Working Capital Flashcards
The sum of the organization’s investment in current assets, or more simply, total current assets
Working capital
Cash and other short-term assets that the organization expects to convert to cash within one year
Current assets
Cash, short-term securities, accounts receivables, inventories, and prepaid expenses are all examples of what: ______ ____
Current assets
The difference between current assets and current liabilities; indicates an organization’s debt-paying capacity
Net working capital
Type of organization where initial working capital comes from community/religious order through tax-exempt bonds or philanthropy.
Not-for-profit organizations
The difference between cash receipts and cash disbursements during a given accounting period
Cash flow
The process of converting resources represented by cash outflows into products or services represented by cash inflows
Cash conversion cycle
Predict the timing and amount of cash flows in addition to systematically examining the cost implications of each decision
Cash budgets
FV = PV(1 + i)n
Compounding
Most common form of comparison; evaluates the organization’s performance through computing and showing the relationships of important line items found in the financial statements
Ratio analysis
- Liquidity
- Profitability
- Activity
- Capital structure
Are all types of what kind of analysis
Ratio analysis
Evaluates the trend in the line items by focusing on the percentage of change over time
Horizontal analysis
Evaluates the internal structure of the organization by comparing important line items to a base number
Vertical analysis
The numbers are always better in one direction and always worse as they proceed in the other direction
Directionality
An indication of an organization’s ability to meet its financial obligations
Current Ratio
