Class notes MANAGERIAL ACCOUNTING - Working Capital Management

Working Capital Management
FLIQUIDTY =
to RISK =
I RETURN
OPTIMAL CASH BALANCE NONCURRENT asset =P RETURN

5- transaction cost NONCURRENT LIABILITIES =
I RETURN
D: DEMAND
RATIO CHANGE PROFIT RISK
=
i -



INTEREST RATE CA F tr I
-




I Fn.
I t i

Cl F F F

BAUMOI Fa ± ± ±




=
2 ✗ annual DEMAND ✗ cost NORMAL TIME USAGE
=
CC NORMAL LEAD TIME X AVERAGE USAGE

MILER ORR -
SAFETY STOCK
=
2 ✗ CONVERSION ✗ VARIANCES OF Daily NCF :( MAX IT NORMAL -

IT ) ✗ AVE . USAGE

4 ✗ DAILY OPPORTUNITY Cosi REORDER POINT WITH STOCK
TRANSACT IN COST = NO . OF TRANSACTIONS ✗ COST
=
CARRYING cost = AVERAGE CASH Balance ✗ cost AVE . USAGE ✗ MAX LT

ECONOMIC 10T SIZE / MAXIMUM LEAD TIME
ECONOMIC ORDER QUANTITY =
Max .
DELAY 1- Normal Li



=F÷÷÷÷÷÷÷÷÷÷÷:* D= ANNUAL DEMAND / annual
PRODUCTION
: *.
MAXIMUM

= SAFETY
DELAY
STOCK

CARRYING COST PER UNIT AVE DAILY USAGE

=
PURCHASE PRICE ✗ % OF AVE . INVIYIEVIL

CURRENT PRICE
=
AMOUNT -

INTEREST ( amount ✗ %xE% )

INCREASE IN ANNUAL DEMAND
=
It INCREASE

EOQ

1 . Za ( It % D)
K


/ ZAD )
2-
( it %)
K


3- ZAD
I / 1- %) K
GET THE %QuaRE root