Introduction
Working capital management involves monitoring cash flow, current assets, and current liabilities through ratio analysis. This includes evaluating elements of operating expenses, such as the working capital ratio, collection ratio, and inventory turnover ratio. The four key components of working capital are trade receivables, inventory, cash and bank balances, and trade payables.
Learning Objectives
Upon completing the Cash Flow and Working Capital Management course, participants will:
- Clearly define working capital.
- Assess working capital adequacy and liquidity.
- Identify risks from poor working capital management.
- Study key liquidity ratios to understand a business’s working capital position.
- Practice techniques to enhance working capital management.
Training Methodology
This collaborative training program includes:
- Lectures
- Seminars & Presentations
- Practice on cash flow statements
- Review of topical articles on cash flow analysis
- Group syndicate work
- Assignments
- Case Studies & Functional Exercises Xcelerate Training Institute uses the ‘Do-Review-Learn-Apply’ model for practical and interactive learning.
Benefits for Your Organization
Organizations will benefit from:
- Increased awareness and responsiveness towards working capital and cash management.
- Enhanced ability to apply best practices in working capital management.
- Improved working capital performance.
- Increased liquidity to pursue strategic goals.
Benefits for You
Participants will gain:
- Understanding of various techniques used to manage working capital.
- Insights into supply chain aspects, including commercial terms, discount structures, and payment scenarios.
- Knowledge to reduce work in progress and avoid stock liabilities.
- Skills to monitor, validate, and analyze stock.
- Understanding of the demand chain, including commercial terms and credit rating agencies.
Target Audience
This course is suitable for:
- Accountants involved in reporting and recording working capital accounts.
- Business managers responsible for managing the cash operating cycle.
- Finance professionals working in the treasury function.
- Business owners analyzing the cash operating cycle.
Course Outline
Introduction to Working Capital
- What is Working Capital?
- How to Calculate Working Capital?
- What is Working Capital Management?
- Optimizing Working Capital
- Relevant IFRS
Understanding Working Capital Ratios
- Significance of Working Capital Ratios
- Determining Efficiency of Working Capital Management
- Current Ratio
- Liquid Asset Ratio
- Inventory Turnover Ratio
- Debtors Turnover Ratio
- Operating Cycle
- Cash Conversion Cycle (CCC)
- Aims of Calculating CCC
Liquidity vs. Solvency
- Difference Between Liquidity and Solvency
- Understanding Solvency Ratios
- Shareholder Equity Ratio
- Debt Equity Ratio
- Interest Coverage
Cash Flow Forecast
- Importance of Cash Flow Forecast
- Establishing Assumptions Based on Current Conditions
- Estimating Cash Inflows and Outflows
- Identifying Short-Term Investments
- Exploring Sources of Funds
- Controlling Application of Funds
- Best Practices in Cash Management
- Case Study: Walmart
Enterprise Resource Planning (ERP)
- Sales
- Bill of Material
- Material Management
- Procurement
- Production
- Finance
Inventory Control
- Components of Inventory
- Importance of Inventory Management
- Inventory Costing Methods
- Perpetual Inventory System
- Periodic Inventory System
- ABC Analysis
- Physical Controls
- Best Practices in Inventory Management
Trade Receivables
- Approved Credit Policy
- Approved Revenue Recognition Policy
- Setting Credit Limits
- Effective Order Dispatching
- Separate Bank Account for Collection
- Interface with Inventory System
- Modes of Collection
- Regular Review of Debtors Reports
- Age Analysis
- Best Practices in Trade Receivables
Trade Payables
- Assessment of Suppliers
- Credit Requirements
- Three-Way Match
- Interface with Inventory System
- Warranty Arrangements
- Return of Goods
- Frequency of Payments
- Provisions
- Best Practices in Trade Payables
Cost of Capital
- Borrowing Requirements
- Long-Term vs. Short-Term Borrowing
- Equity or Debt Capital?
- Dividend Policy
- Cost of Capital
- Weighted Average Cost of Capital