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Working Capital Management Worksheet

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Working Capital Management Concepts Worksheet

Concept Application of Concept in the Simulation Reference to Concept in Reading

Working Capital In the working capital management simulation, the management of the working capital included mostly the management of collections and loan repayment. "Short-term, or current, assets and liabilities are collectively known as working capital" (Brealey, Myers, & Allen, 2005)

Cash inflows and Cash outflows In the working capital management simulation, some of the cash inflows included collecting outstanding receivables from the business partners. Some of the outflows included operating expenses and accounts payable. Cash inflows come from collections on accounts receivables. Cash outflows are condensed into four categories: payments on accounts payable, operating expenses, capital expenditures, taxes, interest, and dividend payments (Brealey, Myers, & Allen, 2005)

Terms of Sale In the working capital management simulation, Lawrence has terms of sale set up with its business partners to pay a certain percentage at the time of the sale and pay the rest the following week. Terms of sale are the individual practices that a firm has for transactions that involve credit. (Brealey, Myers, & Allen, 2005)

Commitment In the working capital management simulation, Lawrence has a line of credit with Central Bank with a limit of $1.2 million. The interest rate increases depending on the amount borrowed. Lawrence repays the loan during the last week of each month, after retaining a minimum positive cash balance of $50,000. "Nearly three-quarters of commercial bank loans are made under commitment. In this case the company establishes a line of credit that allows it to borrow from the bank up to an established limit." (Brealey, Myers, & Allen, 2005)

Credit Analysis In the working capital management simulation,



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