The Importance of Working Capital Management

The Importance of Working Capital Management Working capital management defines the management in the short term of the relationship between a companys current assets and liabilities. The most common elements of working capital will include inventory, receivables and payables which represent the operating working capital (OWC) held by a company usually within a year. Fig.1 below shows the interaction between these elements of OWC. The goal of OWC management is to ensure that a company has enough cash flow, measure in terms of liquidity, to satisfy its short term debts and continue to support its day to day operations. Most articles and books discuss the significance of OWC in terms of obtaining an optimal balance between inventory, receivables and payables, McLaney E. and Atrill P., Accounting: An Introduction (Prentice Hall, 2008). Abraham et al., Accounting for Managers, (Cengage, 2008) further expatiates on this critical importance and state that most organisations invest between 25 40% of their net assets on OWC which represents a major short term investment. However, these books present a generic methodology to OWC and do not consider a firms unique nature, industries or size. Furthermore, this significance of working capital will depend on its size and composition and will vary between industries such as Rolls Royce Plc a manufacturing company will place particular attention to its high inventory levels and payables unlike British Airways Plc a service provider with no inventory. Thomas M. Krueger, An Analysis of Working Capital Management Results Across Industries, American Journal of Business, 2005, vol 20 presented a research based on the annual ratings of working capital management across industries published in CFO magazine. The result indicated that there was a consistency in working capital measures within industries but the working capital measures were are not static over time. In an online article Philip McCoster (2003), Accountancy: The Importance of Working Capital, (http://www.accountancy.com.pk/articles_students.asp?id=77).[Online].(Accessed 28/03/11) agrees with this dynamic nature of working capital and highlights this importance in more subtle way that most organisations are profitable on paper but are forced to cease trading because they cannot meet short term debts. According to him, small businesses in particular are prone to fail especially during start up bec ause they ignore the importance of working capital problems. Generally the importance of working capital is indisputable and whether its elements are managed as a whole or individual, its management is still important in order for an organisation to effectively manage its cash flow to continue operation. But while this is most said in papers, it seems rather paradixocal that in reality the importance OWC is ignore and most companies find themselves at the point of bankruptcy as was the case in the winning margin game. As a production manager in the Winning Margin game, I realised that the decisions I made especially in forecasting and managing machines output was very critical to the overall amount of finished goods inventory needed to achieve a positive OWC. This was clearly depicted in year two when two critical decisions; Forecasted a total production output of 11 costing $40 (appendix: Production and Sales Plans For The Year Ahead). Purchase of two additional Mark II machines (See appendix: Balance Sheet) This resulted to an increase in the amount of inventory to contracted amount although some inventory was tied up in Work in Progress and Finished goods leading to a drop in operating working capital (Year 2 Cash Flow Statement). Furthermore, the cash spent on new machines also led to a drop in the operating cash flow of the business. Therefore, in real life the production manager role is strategic and has a big impact on working capital and the overall business objective but his/her decisions can only be as effective when taken in collaboration with other departmental heads. 2.2 BUDGETING McLaney E and Atrill P., Accounting: An Introduction (Prentice Hall, 2008) defined a budget as a short term financial plan prepared by a business as an integral part of its strategic plan framework. A budget is use by managers to examine and compare between the actual to what was planned in a process known as the budget control. By using this technique, Group E benefited from the budgetary process in many ways: Forward thinking and identification of short-term problems: During the planning process of year 2, we realised that we had to budget for additional machine as well as additional loans. Doing this in good time gave us time to consider alternatives and chose the best course of action to take. Improved co-ordination: Doing planning each year meant we had to co-ordinate with each other. This was crucially beneficial because it improved visibility and decisions making as all activities were linked together. For example, decisions on production depended on sales estimates, raw material availability and funding to finance it. It provided a system of Control: At the beginning of each year, we had to compare year 1 and 2 performance and established areas of concerned. This provided a system of control and better planning for year 3. It created a system of authorisation: By deciding on a master plan of action for each year, this helped set expenditure limits especially as I, the production manager, wanted to increase amount of machine purchased in year 2 but was restricted. The budget motivated us to perform better: By establishing responsibilities to each member of the group, was beneficial to the whole team as each members felt they had contributed to the overall business objectives. Hence improving the teams spirit to perform. 2.3 Absorption Costing Absorption costing is a method of calculating the full output cost by charging direct costs with a fair share of indirect costs. The essence of absorption costing is to make costing simpler and easier so that management can make informed decisions. In the Winning Margin game, the use of this technique was beneficial to our group in several ways: Helpful in making output decisions: Absorption costing technique made calculating planned sales easier and as a team we were able to make informed decisions on production and cash flow. Exercising control decision: absorption costing is often used as a basis of budgeting and budget control. Therefore, it was beneficial to the team as it formed the basis of our budget and we were able to exercise control over our budget and plans Furthermore, the technique was particular useful to achieve efficiency since we were able to make decisions that compares alternative costs of doing similar things. For example we compared the costs of buying a Marked II or Mark III machine in year 2 as well as deciding between the various types of product to produce. In addition to this, absorption costing technique was significant as we were able to assess our teams performance. Its use made calculating yearly production cost, sales, profit and other financial data easier. This made facilitated the process of assessing our business and team performance for any given year. Although widely practiced, in real life the use of absorption costing technique will not be as simplistic as in the game. Moreover, the technique has been criticised for its use of past costs which are considered irrelevant in the decision making process as decisions need to reflect the future not the past. Other costing techniques such as variable costing are recommended. (Words 300)

The American Dream in The Great Gatsby :: essays research papers

The American Dream There is no set definition to be found anywhere of the true meaning of The American Dream. Any hope, dream, or goal which was pursued by anyone in the history of America is on an American Dream.In modern times the accepted dream seems to be 2.5 children, a house with a white picket fence, and a perfect spouse. However, as it is shown through out literature from the early days of America to contemporary times the American Dream is not always so simple a concept. America was originally founded on the dream of freedom.People have freedom to pursue what they want.That is the ideal behind the American Dream. Early stories in American literature are about peoples pursuit of the freedom to worship as they pleased. Another version of the American Dream is the hope that immmigrants had of building a better life for their children than they had, as shown in the book My Antonia. Another is the search for acceptance, which is shown in the book Black Boy. Another is simply the hope to survive, as shown in the book Lord of the Flies. Whatever the dream, the most interesting thing that can be read or written about it is the drive of people to attain it.This is best shown in The Great Gatsby. The Pursuit of the American Dream in The Great Gatsby The Great Gatsby,a novel by F,Scott Fitzgerald,is about the American Dream,and the downfall of the people who try to reach it.The American Dream means something different to different people,but in The Great Gatsby,for Jay Gatsby,the subject of the book,the dream is that through acquiring wealth and power,one can also gain happiness.To reach his idea of what happiness is,Gatsby must go back in time and relive an old dream.To do this,he believes,he must first have wealth and power. Jay Gatsby is a man who does not wish to live in the present because it offers him nothing.He spends the majority of his adult life trying to recapture his past and,eventually,dies in his pursuit of it.The reason he wishes to relive the past is because long ago he had a love affair with the rich Daisy Buchanan,who he fell deeply in love with.However,he knew that they could never get married due to the difference in their economic and social statuses.He wants to marry her,but because of this problem he leaves her to gain wealth and social status in order to reach her standards.

Fingerprint and Crime Scene

Which technique is the best choice when blood is found at a crime scene? In the genetics laboratory (under â€Å"resources† at the bottom of the window), who is one individual that contributed to modern genetic analysis? What did this person contribute? The genetics laboratory is the best choice when blood is found at a crime scene. Alec Jefferys contributed to modern genetics analysis by inventing what is now an essential technique called a polymerase chain reaction. How are computers used in fingerprint analysis? They are used to identify minutiae which may be loops, dots, forks, islands and so forth.Comparison points must be perfectly matched for two fingerprints to be considered identical Who is a pioneer in fingerprint analysis? Describe a famous case that this person was involved in. Edward Foster testified as a fingerprint expert in a case called caution fresh paint in 1911. Fingerprints in the wet paint next to a murder victim were the only clue, he used those prints t o demonstrate to the court that the prints of one man was a match and he was convicted for the crime What is the role of the forensic chemist in crime scene investigation? They analyze all chemical, organic and inorganic aspects of a sample.They separate the components and identify them using a variety of tests and devices. Who helped pioneer forensic chemistry? Describe one of her famous cases. France McGill was one of the pioneers that helped forensic chemistry, when he examined the stomach of an elderly couple who had died she found a large quantity of strychnine which is a powerful poison that was along with bran. The murder weapon was soon identified they were eating bran muffins baked by their granddaughter that was intended for her father. She was charged with murder and then acquainted In the ballistics laboratory, what is the water tank used for?Describe the analysis. To determine whether a bullet found at the crime scene actually came from the suspect’s weapon. It m ust be compared with another bullet from the same gun. Ballistics experts fire it into a special water tank that slows and stops the bullet so that they can collect it in tact Who helped pioneer ballistics analysis? What did he contribute? Wilfrid Derome the Laboratoire de recherches medico-legales de Montreal, the first forensic laboratory in North America and only the third in the world Why is measuring and diagramming the scene important?It is important because it helps to note specific locations of objects, clues, and the body. The photo and this sketch will later be used to draw an accurate plan of the site on the computer What materials or tools would a crime scene technician use? Something to take a photograph, polilight, measurements and diagrams, revealing prints, and something to take samples From the activity and the information it had, what aspect of an investigation do you think you’d most like to work in?For example, would you prefer one of the laboratories? Wha t appeals to you about this particular aspect of the investigation? I would like to work in the ballistics laboratory, it appeals to me because I would play one of the most important roles I think and that is to identify the weapon used in the crime scene. I will get to compare marks on bullets, cartridges, blades, and other kinds of weapons left at the crime scene.

The Controversy Of Homophobia During World War II Essay

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