E

Working Capital Management Worksheet

Concept Application of Concept in Scenario Citation of Concept in Reading Personal Experience in your Organization

Short-term financing plan:

* Bank loan - borrowing from the bank.

* Stretching payable - putting off paying its bills.

Due to the situation that Lawrence has put the company into, in which Lawrence had borrowed from the bank and deferred payment to Gartner by a week. Brealey, 2005, p. 852 In order to meet the liabilities of deferred tax payment and the company's payable obligation, my company has applied for a revolving credit line by our lender. So for the short-run, my company where I am working for has managed to make payment on time.

Financial budgeting:

* Cash inflow.

* Cash outflow.

The task imposed on the CFO of planning cash inflow and cash outflow to retain at least a minimum of $50,000 each week while keeping the loan burden to the least level required a careful financial budgeting. Brealey, 2005, p.849 At my company, a budget for expecting expenses associated with a particular property will be planned. Improvements on the property and projected cash inflow will be assessed in order to have the needed cash handy for the upcoming month.

Credit Management:

* Accounts receivables.

* Accounts payables.

Regarding the task required based on the scenario in the simulation, the CFO has to negotiate short-term payment and collection arrangements with its business partners for keeping the amount of cash the company needs to borrow as low as possible. Brealey, 2005, p.814 Property managers are told to collect rents from tenants as much as possible each month. To put forth this effort and encouraging them to really make the attempts, special bonus is paid out if a certain percentage on total rent for the property has been reached.

Working Capital Management Worksheet

Concept Application of Concept in Scenario Citation of Concept in Reading Personal Experience in your Organization

Cash:

* Offering liquidity.

* Being better prepared in case of cash shortage.

The requirement of retaining at least a minimum of $50,000 on cash applies to the concept that cash has more liquidity to offer.

Also having enough cash on hand increase the chance for the company to survive for unexpected event as illustrated in the scenario where additional liabilities were due because of poor packaging and handling about the shipped equipments.

Brealey, 2005, p.821 This concept can also be observed in the company where I am with. Besides the weekly check cut to meet our obligations, additional cash has been put aside by our controller. Once it has reached the set level, surplus will be distributed to other properties that have funding shortages for planned projects.

The underlining messages in chapter 31 can be seen when running the simulation.

* Impacts on its business partners and the ongoing existing relationship.

* Trade off needs to be made on a regularly basis when it comes to decision making process.

Overall, the scenario has conveyed the message that whatever decisions the CFO has made there exists indirect impacts on the organization's business partners. However, the degree of impact depends on how much dependency one company is relying on its partner to generate income.

Further, there is no way that decision made by the company