A significant amount of management time in many businesses, particularly small businesses, is devoted to assuring that there will be sufficient cash to pay employees, vendors, and creditors. While the expression “Cash is King” has some truth, a solid understanding of the inter-relationships between working capital components is necessary for all businesses to succeed in the long run.

Working capital is the current assets used in a business, which are typically financed by current liabilities. While the time frame for current assets and current liabilities is typically one year, working capital management has long-term implications for many firms.

Working capital management focuses on two basic questions: (1) What is the appropriate level of current assets for a firm to carry, both in total and for each specific group, and (2) how should current assets be financed.

The course is made up of 8 modules that examine working capital management at a macro and micro level. Starting with a discussion of a firm’s appetite for risk and the implications of having too much and too little working capital, the course then explores issues related to managing types of current assets, including cash, marketable securities, receivables, and inventory. The types of short-term credit to finance current assets is then covered, followed by a discussion of the costs of short-term credit.

The course content covers working capital management topics tested in the Certified Management Accountant (CMA) Part 2 examination.

Topics include:

  • Working capital risks and strategies.
  • Cash management.
  • Cash forecasts.
  • Marketable securities.
  • Receivables management.
  • Inventory management.
  • Short-term credit.
  • Costs of short-term credit.

Course Key Concepts: Working capital, current assets, current liabilities, working capital management, liquidity, risk appetite, opportunity cost, maturity matching, working capital strategy, working capital forecast, cash management, disbursement float, marketable securities, treasury bills, repurchase agreements, bankers’ acceptances, commercial paper, credit policy, default risk, factoring receivables, factoring receivables “with recourse”, factoring receivables “without recourse”, lead time, safety stock, re-order point, economic order quantity (EOQ), just in time (JIT), collateral, trade credit, short-term loans, line of credit, simple interest, commitment fee, compensating balances, trade discounts.

Learning Objectives
  • Recognize the components of working capital and calculate net working capital.
  • Explore the factors that determine the risk appetite of an organization.
  • Explore how risk affects a firm's approach to managing working capital.
  • Identify working capital opportunity costs and the tradeoffs between liquidity risk and return on assets.
  • Identify and explain the three motives for holding cash.
  • Identify methods of speeding up cash collections.
  • Recognize the different types of marketable securities.
  • Recognize the trade-offs among the variables in marketable security selections, including safety, marketability, yield, maturity, and taxability.
  • Recognize the components of credit policy.
  • Explore the impact changes in credit policy have on accounts receivable, working capital and sales volume.
  • Identify the reasons for carrying inventory and factors that influence its level.
  • Identify and calculate carrying costs, ordering costs, and stockout level.
  • Identify the different types of short-term credit, including trade credit, short-term bank loans, lines of credit, commercial paper and banker's acceptances.
  • Explore how to calculate the effective interest rate of trade discounts and calculate the effective interest rate on loans with compensating balances.
Last updated/reviewed: August 22, 2023
16 Reviews (64 ratings)

Reviews

5
Anonymous Author
Good coverage on the most relevant topics pertaining to working capital and definitely recommend as a solid intro. Suggestions for improvement: add a little more content on benchmarks (i.e. typical effective rates, that was provided in a few instances and was helpful) and summarized charts for the Marketable Securities and ST Credit options presented, and just a little information on the process/timeline to obtain financing or trade credit.

5
Anonymous Author
This course provided a lot of great information and detail around Working Capital management. I especially appreciated the level of detail around cash forecasting and various ways to analyze the health of working capital within your business. Very helpful!

5
Anonymous Author
Excellent practical course. Instructor is engaging. I found the quizzes to be tougher than the final exam. I recommend this course for all finance professionals who are managing cash for the first time

4
Member's Profile
I thought the course was well done and had relevant information. There were a couple areas I wished were more in depth, but overall the course helped my understanding and achieved my goals.

5
Anonymous Author
It covered a wide variety of topics and went in-depth to an appropriate level (good introductory course with some nice examples, but not too in-depth).

5
Anonymous Author
Interesting course on cash management strategies and tools. Instructor is effective and engaging. Concepts are useful for real world applications.

5
Anonymous Author
This course was very interesting and informative. I enjoyed learning about working capital and why it is important to management decisions.

4
Member's Profile
Great course and engaging instructor. There was a lot to consume in this course. I would recommend taking it in smaller sections.

5
Anonymous Author
Tough course but I think it is more advanced than I thought. Helped me realize I have work to do on my knowledge in this area.

4
Anonymous Author
Good overview of working capital management. However I was hoping for more detail on cash forecasting best practices.

5
Anonymous Author
Great course for understanding different strategies for managing working capital/cash and the benefits/disadvantages.

4
Anonymous Author
Good overview of working capital management. Very essential part of the Finance function of any organization.

5
Anonymous Author
The world of finance will be of interest to any listener. The test helps to consolidate the result

4
Member's Profile
Great working capital overview. Covers working capital management on receipts and disbursements.

5
Anonymous Author
Good class, it cleared up definitions and characteristics of different marketable securities.

5
Anonymous Author
Well presented, easy to follow, not dull. Informative and relevant.

Prerequisites
Course Complexity:

No advanced preparation or prerequisites are required for this course.

Education Provider Information
Company: Illumeo, Inc., 75 East Santa Clara St., Suite 1215, San Jose, CA 95113
Contact: For more information regarding this course, including complaint and cancellation policies, please contact our offices at (408) 400- 3993 or send an e-mail to .
Instructor for this course
Course Syllabus
INTRODUCTION AND OVERVIEW
  Course Overview of Working Capital Management2:24
  Working Capital Risks and Strategies19:07
  REVIEW QUESTIONS: Working Capital Risks and Strategiesquiz
  Cash Management17:21
  REVIEW QUESTIONS: Cash Management quiz
  Cash Forecasts17:44
  Marketable Securities Management18:08
  REVIEW QUESTIONS: Marketable Securities Managementquiz
  Receivables Management11:26
  REVIEW QUESTIONS: Receivables Management quiz
  Inventory Management18:52
  REVIEW QUESTIONS: Inventory Management quiz
  Short-Term Credit16:09
  REVIEW QUESTIONS: Short-Term Creditquiz
  Costs of Short-Term Credit15:02
  REVIEW QUESTIONS: Costs of Short-Term Creditquiz
CONTINUOUS PLAY
  Working Capital Management2:16:12
SUPPORTING MATERIAL
  Slides: Working Capital ManagementPDF
  Working Capital Management Glossary/ IndexPDF
REVIEW AND TEST
 FINAL EXAMexam