Corporate Finance #6 Management of Current Assets

This course will discuss how to manage current assets from a corporate finance perspective.

It will include many example problems, some in presentation format, some using Excel worksheets. Each Excel problem will include a downloadable Excel workbook having at least two tabs, one with the answer, another with a preformatted worksheet you can populate along with the step-by-step instructional videos.

Current asset classes we will consider include cash, accounts receivable, inventory, and marketable securities.

Balancing the asset mix between current assets and long-term assets is critical and helps a company maintain a safe level of liquidity while maximizing profitability.

Cash management is at the heart of a good current asset strategy, cash being part of every business cycle. Sufficient cash will be needed to pay out obligations as they become due.

Collecting accounts receivable efficiently can help increase cash flow. The company may use strategies like cash discounts to increase accounts receivable turnover. When using cash discounts, a company needs to compare the benefit of increased cash flow to the cost of the discount.

Finding the ideal level of inventory turnover will also improve performance greatly. A reduction in the period of time inventory is held can reduce holding costs and lessen the chance of spoilage or obsolescence.

We will discuss the concept of a just-in-time inventory system.