Introduction to the city Essay Example | Topics and Well Written Essays - 750 words

Introduction to the city - Essay Example Cash flow can be defined as ‘the pattern of income and expenses, and its consequences for how much money is available at a given time’ The process of managing working capital would involve deciding what quantity of cash, other liquid assets, accounts receivable and inventories the firm would require to have at any given point of time. â€Å" The management of working capital is concerned with the management of assets such as cash, marketable securities, account receivable, investor prepaid expenses and the current assets; also liabilities such as accounts payables, wages payables and accruals.†2 Working capital can generally be generated by receiving short term loan from a bank or by placing aside a sum from the equity. Generally working capital can not be added up while taking a long term loan from a bank. According to Keynes a firm holds working capital for three basic reasons; to benefit from timely opportunities arising in the market, as a fund to deal with unforeseen crisis that require immediate action and to carry out the regular business activities of cash inflow and outflow. The process of working capital management is relatively complex and it is meant to ensure that a firm is capable to carry out its regular activities with optimum efficiency at the same time fulfill the short term debt requirements and forthcoming operational expenditures. This process requires an analytical approach towards the spending and receiving of the funds available on hand. â€Å"The analysis requires decisions to be taken for the following questions such as: how should the firm manage its cash? To whom should the firm grant credit? How much inventory should the firm keep? What should be the composition of the firm’s current debt? â€Å"3 The goal of managing working capital is to have cash inflow as early as possible and to delay the cash outflow as much as possible and at the