{"id":71,"date":"2025-10-16T06:00:23","date_gmt":"2025-10-16T05:00:23","guid":{"rendered":"http:\/\/ecourse.co.uk\/8135\/?p=71"},"modified":"2025-10-22T14:24:00","modified_gmt":"2025-10-22T13:24:00","slug":"week-6-uw-17","status":"publish","type":"post","link":"https:\/\/ecourse.uk\/8135\/?p=71","title":{"rendered":"Week 5 [9] [CORE]: Working capital management"},"content":{"rendered":"<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone wp-image-1255\" src=\"https:\/\/ecourse.uk\/8135\/wp-content\/uploads\/2021\/03\/money-grahic.jpg\" alt=\"\" width=\"778\" height=\"277\" srcset=\"https:\/\/ecourse.uk\/8135\/wp-content\/uploads\/2021\/03\/money-grahic.jpg 963w, https:\/\/ecourse.uk\/8135\/wp-content\/uploads\/2021\/03\/money-grahic-300x107.jpg 300w, https:\/\/ecourse.uk\/8135\/wp-content\/uploads\/2021\/03\/money-grahic-768x274.jpg 768w\" sizes=\"auto, (max-width: 778px) 100vw, 778px\" \/><\/p>\n<div id=\"ez-toc-container\" class=\"ez-toc-v2_0_84 counter-hierarchy ez-toc-counter ez-toc-grey ez-toc-container-direction\">\n<div class=\"ez-toc-title-container\">\n<p class=\"ez-toc-title\" style=\"cursor:inherit\">Table of Contents<\/p>\n<span class=\"ez-toc-title-toggle\"><a href=\"#\" class=\"ez-toc-pull-right ez-toc-btn ez-toc-btn-xs ez-toc-btn-default ez-toc-toggle\" aria-label=\"Toggle Table of Content\"><span class=\"ez-toc-js-icon-con\"><span class=\"\"><span class=\"eztoc-hide\" style=\"display:none;\">Toggle<\/span><span class=\"ez-toc-icon-toggle-span\"><svg style=\"fill: #999;color:#999\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"list-377408\" width=\"20px\" height=\"20px\" viewBox=\"0 0 24 24\" fill=\"none\"><path d=\"M6 6H4v2h2V6zm14 0H8v2h12V6zM4 11h2v2H4v-2zm16 0H8v2h12v-2zM4 16h2v2H4v-2zm16 0H8v2h12v-2z\" fill=\"currentColor\"><\/path><\/svg><svg style=\"fill: #999;color:#999\" class=\"arrow-unsorted-368013\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\" width=\"10px\" height=\"10px\" viewBox=\"0 0 24 24\" version=\"1.2\" baseProfile=\"tiny\"><path d=\"M18.2 9.3l-6.2-6.3-6.2 6.3c-.2.2-.3.4-.3.7s.1.5.3.7c.2.2.4.3.7.3h11c.3 0 .5-.1.7-.3.2-.2.3-.5.3-.7s-.1-.5-.3-.7zM5.8 14.7l6.2 6.3 6.2-6.3c.2-.2.3-.5.3-.7s-.1-.5-.3-.7c-.2-.2-.4-.3-.7-.3h-11c-.3 0-.5.1-.7.3-.2.2-.3.5-.3.7s.1.5.3.7z\"\/><\/svg><\/span><\/span><\/span><\/a><\/span><\/div>\n<nav><ul class='ez-toc-list ez-toc-list-level-1 ' ><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-1\" href=\"https:\/\/ecourse.uk\/8135\/?p=71\/#Introduction\" >Introduction<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-2\" href=\"https:\/\/ecourse.uk\/8135\/?p=71\/#Lecture_slides\" >Lecture slides<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-3\" href=\"https:\/\/ecourse.uk\/8135\/?p=71\/#The_lecture_slides_for_today_are_here\" >The lecture slides for today are here.<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-4\" href=\"https:\/\/ecourse.uk\/8135\/?p=71\/#Discussion_question\" >Discussion question<\/a><\/li><li class='ez-toc-page-1 ez-toc-heading-level-4'><a class=\"ez-toc-link ez-toc-heading-5\" href=\"https:\/\/ecourse.uk\/8135\/?p=71\/#Supportive_reading\" >Supportive reading<\/a><\/li><\/ul><\/nav><\/div>\n<h4><span class=\"ez-toc-section\" id=\"Introduction\"><\/span>Introduction<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Liquidity is a huge issue &#8211; especially now. In many cases we don&#8217;t really think about it &#8211; until it becomes an issue. It usually becomes an issue when liquidity is too low. And when it becomes an issue it can escalate alarmingly and cause considerable damage and distress.<\/p>\n<ul>\n<li>Liquidity issues can affect <strong>countries<\/strong>. There have been recent major economic and political issues in <a href=\"https:\/\/en.wikipedia.org\/wiki\/Crisis_in_Venezuela\" target=\"_blank\" rel=\"noopener\"><strong>Venezuela<\/strong> <\/a>[2017] and <strong><a href=\"https:\/\/www.reuters.com\/markets\/rates-bonds\/lebanons-financial-crisis-how-it-happened-2022-01-23\/\" target=\"_blank\" rel=\"noopener\">Lebanon<\/a> <\/strong>(2023). See also <a href=\"https:\/\/www.imf.org\/en\/Blogs\/Articles\/2024\/08\/01\/now-is-the-time-to-help-countries-faced-with-liquidity-challenges\" target=\"_blank\" rel=\"noopener\"><strong>here<\/strong><\/a> from the International Monetary Fund (IMF) blog.<\/li>\n<li>It can affect <strong>individual companies<\/strong>, for example <strong><a href=\"https:\/\/www.companyrescue.co.uk\/guides-knowledge\/news\/\" target=\"_blank\" rel=\"noopener noreferrer\">here<\/a><\/strong>.<\/li>\n<li>And it can affect <strong>individuals<\/strong> and be close to home, see <strong><a href=\"https:\/\/debtcamel.co.uk\/debt-options\/guide-to-bankruptcy\/\" target=\"_blank\" rel=\"noopener noreferrer\">personal insolvencies<\/a><\/strong><\/li>\n<li>Have a look at <strong><a href=\"https:\/\/www.newcastle-staffs.gov.uk\/downloads\/file\/1715\/treasury-management-strategy-2025-26\">Newcastle under Lyme&#8217;s Treasury Management Strategy<\/a><\/strong><\/li>\n<\/ul>\n<p>For individual businesses the efficient management of short term assets (current assets) and short term liabilities (current liabilities) is crucial for the survival and growth of a business. This week we&#8217;ll be looking at the management of these items (working capital) and will see the process as a series of interlinks and trade-offs.<\/p>\n<h4><span class=\"ez-toc-section\" id=\"Lecture_slides\"><\/span>Lecture slides<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<h4><span class=\"ez-toc-section\" id=\"The_lecture_slides_for_today_are_here\"><\/span>The lecture slides for today are <strong><a href=\"http:\/\/www.ecourse.co.uk\/materials\/wcmanagement.pdf\" target=\"_blank\" rel=\"noopener noreferrer\">here<\/a><\/strong>.<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>If cash is the &#8216;lifeblood&#8217; how much is needed? Like animals the amount of working capital needed may depend on the size of the business. Big businesses generally need more working capital. However, it may be too high or too low (perhaps like blood pressure). So what&#8217;s right?<\/p>\n<hr \/>\n<h4><span class=\"ez-toc-section\" id=\"Discussion_question\"><\/span>Discussion question<span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Discussion question from a previous exam paper:<\/p>\n<p>a) Businesses need to balance the trade-offs between holding too much cash and holding too little cash.<\/p>\n<p>Discuss the costs to a business of holding too little cash and the costs of holding too much cash.<\/p>\n<p style=\"text-align: right;\"><em>(15 marks)<\/em><\/p>\n<p>b) A business intends to increase its profit by increasing its sales.<\/p>\n<p>Discuss the pressures that increasing sales can put on a business\u2019s working capital.<\/p>\n<p style=\"text-align: right;\"><em>(10 marks)<\/em><\/p>\n<hr \/>\n<h4><span class=\"ez-toc-section\" id=\"Supportive_reading\"><\/span><strong>Supportive reading<\/strong><span class=\"ez-toc-section-end\"><\/span><\/h4>\n<p>Philip McCosker,\u00a0The Importance of Working Capital, ACCA (2000)<br \/>\n&#8211; available <strong><a href=\"http:\/\/www.accountancy.com.pk\/articles_students.asp?id=77\" target=\"_blank\" rel=\"noopener noreferrer\">online<\/a><\/strong><\/p>\n<p>Working Capital: Meaning and Formula: a basic introduction &#8211; available <a href=\"https:\/\/vidfin.com\/articles\/working-capital\" target=\"_blank\" rel=\"noopener\"><strong>online<\/strong><\/a><\/p>\n<p>Cash Management: online at <strong><a href=\"https:\/\/kfknowledgebank.kaplan.co.uk\/financial-management\/working-capital\/cash-management\" target=\"_blank\" rel=\"noopener noreferrer\">Kaplan Financial Knowledge Bank<\/a><\/strong><\/p>\n<p>D. Chandra Bose: Fundamentals of Financial Management, Prentice-Hall, 2006, chapters 9, 10, 11, and 12 &#8211; available on <strong><a href=\"http:\/\/books.google.co.uk\/books?id=HfnBV_ahKisC&amp;pg=PA232&amp;lpg=PA232&amp;dq=Baumol+inventory+management&amp;source=bl&amp;ots=YzqV6eGmac&amp;sig=zpWVAvp0rykiqQ_CiFC1nb9inYQ&amp;hl=en&amp;sa=X&amp;ei=dR96UsqUGMyAhAe7o4GYDQ&amp;ved=0CFIQ6AEwATgK\" target=\"_blank\" rel=\"noopener noreferrer\">Google Books<\/a><\/strong><\/p>\n<p>Firth: Management of Working Capital,\u00a0Macmillan, 1976<br \/>\n&#8211; a bit dated, but still remains a useful introduction. It&#8217;s in the university library.<\/p>\n<p>Dhiraj Sharma: Working Capital Management, 2014, New Delhi : Himalaya Publishing House<br \/>\n&#8211; an electronic resource, available in the university library.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Introduction Liquidity is a huge issue &#8211; especially now. In many cases we don&#8217;t really think about it &#8211; until it becomes an issue. It usually becomes an issue when liquidity is too low. And when it becomes an issue it can escalate alarmingly and cause considerable damage and distress. Liquidity issues can affect countries. [&hellip;]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_links_to":"","_links_to_target":""},"categories":[3],"tags":[],"class_list":["post-71","post","type-post","status-publish","format-standard","hentry","category-lectures"],"_links":{"self":[{"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/posts\/71","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=71"}],"version-history":[{"count":21,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/posts\/71\/revisions"}],"predecessor-version":[{"id":1986,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=\/wp\/v2\/posts\/71\/revisions\/1986"}],"wp:attachment":[{"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=71"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=71"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/ecourse.uk\/8135\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=71"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}