Working Capital and Cash Flow Flashcards
Working capital
Current assets less current liabilities
Inventory turnover period
(average inventory/COS) x365
Rate of Inventory turnover
COS/Average Inventory
Receivables Collection Period
(Average receivables/Revenue) x 365
Payables Payment Period
(Average payables/Purchases) x 365
Current Ratio
Current assets/ Current liabilities
Quick Ratio
(Current assets - Inventories)/ Current liabilities
Raw materials holding period
(Average Inv. of Raw Materials/ Purchases) x 365
Average production period
(Av. Inv. of WIP/COS) x 365
Average Inventory-holding period
(Av. Inv. of finished goods/ COS) x 365
Cash operating cycle
Time between outflow of cash to buy raw material until inflow of cash from customers
Re-order level inventory system
Fixed quality ordered when inventory falls to a predetermined level
Periodic review inventory system
Levels reviewed at fixed intervals
ABC inventory system
Inv. categorised into classes according to annual costs, difficulty to replace or importance. Class A will take most inventory control effort.
Economic order quantity model
√(Cost of placing order x demand in units/Cost of holding inventory)
