WORKING CAPITAL MANAGEMENT

This course examines the various components of working capital (cash, receivables, payables, inventory), how they interact with one another, and how they affect (i) firm liquidity and default risk, and (ii) shareholder wealth. The course will build on the basic principles of financial management that students will have learned in earlier courses, and will apply the principles and concepts of financial theory to problems and decisions associated with short-term (working) capital. The course will focus on using working capital optimally, so that funds are not tied up in unproductive assets and, at the same time, the risk of illiquidity (and related default risk) does not exceed desired limits. The ultimate objective, as always, is to maximize shareholder wealth. The course includes both theoretical and applied components. Practical applications are useful, but cannot be studied fruitfully without knowledge of the underlying theory. Numerical examples will be use1d to illustrate the various concepts and applications to be covered in the course.