Week 7 Working Capital Management Following On Fr

Week 7: Working capital managementFollowing on from Week 6, this week you consider the importance of working capital management.As you have already seen in earlier weeks, cash flow is a critical area for the survival of any organisation and without cash it will not be able to function.An organisation needs to understand how long it takes to get its cash in and how quickly it pays its cash out; this is often referred to as the operating cash cycle (OCC). The OCC measures, usually in days, the length of time it takes an organisation to convert inventories (if held) into cash received from customers and then pay cash to suppliers.For many organisations, giving credit is a part of their normal operations. However, the cost of this can be expensive, depending on how long it takes for a customer to pay, as effectively this amounts to a free loan. This may be partially offset by taking longer to pay suppliers, but it is a fine balancing act, as goodwill and trust needs to be maintained in order to ensure the business continues to get supplies.This week you discuss the importance of just-in-time techniques and the associated cost efficiencies