Same as working capital; measurement of operating liquidity.
Why is managing working capital important?
Need for funding, need for sales support, need for liquidity
What are the benefits of holding cash?
Liquidity for day to day operations.
What are the costs and risks of holding cash?
Transaction costs, interest costs, agency costs, currency risk, and real options.
How are receivables and inventories managed?
Trade credit stimulate sales (Marginal profit from incremental sales must be balanced with cost of carrying receivables). For inventories, balance cost of shortages (stock outs) with opportunity costs of carrying inventories
What forms of short-term financing are available through banks?