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WORK CAPITAL MANAGEMENT - Coggle Diagram
WORK CAPITAL MANAGEMENT
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Accounts Receivable
The business acquires an account receivable when it sells different goods or services, on credit.
The term receivable means the promise of the customer to pay with money the amount that was charged for merchandise or services, at a future date.
Generally, in business, this promise is expressed in the amount of cash that will be collected within the next 30 days.
There are several types of receivables, but the 2 best known are: Documents receivable and accounts receivable.
Classes of Accounts Receivable. Accounts receivable from customers represent the sum of money that corresponds to the sales of merchandise, or the provision of services on credit to a customer.
Other items receivable are originated by loans to company officials, at the accrued interest on documents receivable and advances to clients are recorded separately as loans / officials, interest receivable and advances to clients.
Senior Client Assistant and Control Account. In the information that keeps an individual record for each client.
These records of auxiliary accounts of clients are classified in alphabetical order in a major called "auxiliary major of accounts receivable or" auxiliary major of customers ".
The term "Accounts Receivable" is only used when it comes to amounts owed by customers, and these items receivable are classified as a current asset on the balance sheet.
Inventories
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The selection of the method to value the merchandise is important, because the value of the ending inventory affects the cost of goods sold and the net profit that appear in the income statement, as well as the ending inventory that is presented as an asset in the balance sheet.
Valuation of an Inventory. When merchandise is purchased for the purpose of reselling, the purchase is recorded at cost price, less the amount of any merchandise includes freight charges paid by the buyer, insurance comparing merchandise in transit to the storage period, and, plus taxes.
Short Term Financing
In early 1992, Fortune magazine reported that the United States was in the midst of the worst credit shortage seen since World War II.
A part of this decrease could be explained by the decrease observed in the demand for loans, which is typical of recessions, mainly as a result of businesses needing less money to finance expansion.
The main reason for taking out credit was that a large number of banks were in trouble - 124 banks failed in 1991, and twice that number is expected to fail in 1992.
As a result, bank policymakers were placing a great deal of emphasis on the strength of bank portfolios, to the point where bankers believed that the best way to avoid problems was to avoid risk.
How does higher lending banking standards affect the economy? First, the effects are not evenly distributed.
Stronger companies have no problem obtaining credit, but smaller companies at the lower end of the acceptable credit range are severely restricted and are scrutinized extremely carefully.
Short-term credit is defined as any liability that was originally scheduled to be settled within one year.
Short-term funds, the four main types: 1) accrued liabilities, 2) accounts payable (trade credit), 3) bank loans, and 4) commercial paper. In addition, we expose the cost of bank loans and the factors that influence the choice of the most appropriate bank for a company.