Discussion 7: Week 7 Discussion: Working Capital Management Cash Budget Close to 50% of the typical industrial and retail firm's assets are held as working capital. Many newly minted college graduates work in positions that focus on working capital management, particularly in small businesses in which most new jobs are created in today's economy.  To prepare for this Discussion: Shared Practice, select two of the following components of working capital management: the cash conversion cycle, the cash budget, inventory management, and credit policies. Think about scenarios in which your selected topics were important for informing decision making. Be sure to review the video links above and conduct additional research using academically reviewed materials, and your professional experience on working capital concepts to help develop your scenarios. Support your discussion with appropriate examples including numerical examples as necessary. Instructions 1. Post your initial response no later than Sunday, February 14 2. Read and respond to at least 3 of your classmates’ posts. Below are suggestions on how to respond to your classmates’ discussions: a. Ask a probing question, substantiated with additional background information, evidence, or research. b. Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives. c. Offer and support an alternative perspective using readings from the classroom or from your own research. d. Validate an idea with your own experience and additional research. e. Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings. f. Expand on your colleagues’ postings by providing additional insights or contrasting perspectives based on readings and evidence. RESPONSE FOR THE DISCUSSION: In your response to your classmates, consider comparing cash generation techniques at your company versus his or her company. Draw distinctions based on the industry and tell your colleagues why those distinctions are necessary for the management of cash flow. Below are additional suggestions on how to respond to your classmates’ discussions: · Ask a probing question, substantiated with additional background information, evidence or research. · Share an insight from having read your colleagues’ postings, synthesizing the information to provide new perspectives. · Offer and support an alternative perspective using readings from the classroom or from your own research. · Validate an idea with your own experience and additional research. · Make a suggestion based on additional evidence drawn from readings or after synthesizing multiple postings. · Expand on your colleagues’ postings by providing additional insights or contrasting perspectives based on readings and evidence. 150 + Author:Hemanthavalli Balusu Cash Conversion Cycle (CCC): Cash Conversion Cycle (CCC) is a financial metric which is used to indicate the time taken by a ...

1. Discussion 7: Week 7 Discussion: Working Capital
Management
Cash Budget
Close to 50% of the typical industrial and retail firm's assets are
held as working capital. Many newly minted college graduates
work in positions that focus on working capital management,
particularly in small businesses in which most new jobs are
created in today's economy.
To prepare for this Discussion: Shared Practice, select two of
the following components of working capital management: the
cash conversion cycle, the cash budget, inventory management,
and credit policies. Think about scenarios in which your
selected topics were important for informing decision making.
Be sure to review the video links above and conduct additional
research using academically reviewed materials, and your
professional experience on working capital concepts to help
develop your scenarios. Support your discussion with
appropriate examples including numerical examples as
necessary.
Instructions
1. Post your initial response no later than Sunday, February 14
2. Read and respond to at least 3 of your classmates’ posts.
Below are suggestions on how to respond to your classmates’
discussions:
a. Ask a probing question, substantiated with additional
background information, evidence, or research.
b. Share an insight from having read your colleagues’ postings,
synthesizing the information to provide new perspectives.
c. Offer and support an alternative perspective using readings
from the classroom or from your own research.
d. Validate an idea with your own experience and additional
research.

2. e. Make a suggestion based on additional evidence drawn from
readings or after synthesizing multiple postings.
f. Expand on your colleagues’ postings by providing additional
insights or contrasting perspectives based on readings and
evidence.
RESPONSE FOR THE DISCUSSION:
In your response to your classmates, consider comparing cash
generation techniques at your company versus his or her
company. Draw distinctions based on the industry and tell your
colleagues why those distinctions are necessary for the
management of cash flow. Below are additional suggestions on
how to respond to your classmates’ discussions:
· Ask a probing question, substantiated with additional
background information, evidence or research.
· Share an insight from having read your colleagues’ postings,
synthesizing the information to provide new perspectives.
· Offer and support an alternative perspective using readings
from the classroom or from your own research.
· Validate an idea with your own experience and additional
research.
· Make a suggestion based on additional evidence drawn from
readings or after synthesizing multiple postings.
· Expand on your colleagues’ postings by providing additional
insights or contrasting perspectives based on readings and
evidence.
150 +
Author:Hemanthavalli Balusu

3. Cash Conversion Cycle (CCC):
Cash Conversion Cycle (CCC) is a financial metric which is
used to indicate the time taken by a business to convert its
inventory investments and other business resources into cash
flow obtained from sales. It is also known as the net operating
cycle or the cash cycle. CCC is a quantitative measure and a
reliable indicator of the efficiency of a given business. CCC
helps in determining the period in which each input dollar in a
given business is tied to the production processes before it can
be converted into cash.
Businesses that take a longer time to convert investments into
cash would have higher CCC than businesses that take relatively
less time. High CCC is an indicator of inefficiency since it
would mean that the business is not efficient enough to convert
the cash quickly. On the other hand, low CCC is an indicator of
high efficiency, since the business processes are efficient
enough to convert the cash quickly (Nwude, Agbo & Ibe, 2018).
Therefore, if a company has a declining CCC over a given time
period, then it is a sign of its efficiency.
Similarly, if a company has rising CC over a given time, then it
is a sign of inefficiency and should lead to a thorough
investigation of the operational processes. However, it is
important to note that depending on the inventory management
and other related processes. CCC is applicable only for selected
sectors. Also, CCC can differ from one sector to another, due to
the nature of business n each sector being different (Doruk &
Ergün, 2019). Hence, the CCC of a business from one sector
cannot be compared to the CCC of another business from a
different sector.
Inventory management as being an element of working capital:
Inventory may be the asset that is main of company which
facilitates the transformation of cash profits. Inventory

4. management is really an element of working capital
management because the running of a stock having a stock of
products can be a cost that is added to the area of the owner
regarding the company. Therefore, the additional cost into the
title of stock needs management and monitoring so that you can
allow decision making that is informed. Inventory management
is actually an element of the producer’s relation aided by the
client as an effective stock can only just be achieved whenever
the producer knows the demand associated with the customers
by making accurate and prompt decisions. Inventory
management is rightly called the blocked capital that is working
of the company which will be placed to use during the time of
crisis or as soon as the market demand is overwhelmingly high.
Inventory management not merely facilitates the integration
associated with a business that is whole but also keeps the
customers pleased by satisfying their needs. Also, really helps
to minimize the expense of operating a listing and in addition to
that, additionally causes the maximization of profit. A vendor
utilizing the prepared stock to ship could be the key up to a
consumer that is delighted
How CCC helps in decision-making?
As discussed above, CCC helps in determining how much time a
business will take in converting its investments into cash.
Therefore, investors can determine how much time their
invested capital would take to come out as pay-outs. This will
help investors in deciding their investments on a prospective
investment opportunity (Zakari & Saidu, 2016). Companies or
businesses which have a longer CCC would most likely be a bad
investment. Also, CCC can help companies in modifying their
credit policies when it comes to their methods of credit
purchase.
Cash budget:
A cash budget of a business is the expected cash amount and
spending of cash at a given time period (like a year, month, or

5. week). This includes all the cash inflows and outflows of a
business, which in turn might is used to determine the cash
positions of a company in the future. Sales and production
forecasts of a business are used to determine the cash budget.
Along with this, the necessary collections and accounts
receivable amount is also taken into consideration. A cash
budget is a useful financial tool that helps in determining
whether a business has enough cash to operate. In case if a
business does not have a sufficient cash budget, it must r aise an
additional amount by issuing stock. A cash budget is prepared
after all the sales; purchases and expenditure of capital are
made. This is because the cash budget takes into consideration
all of these factors for determining the position of the cash
(Mishra, 2018).
Applications of cash budget for decision making:
As discussed above, a cash budget helps in determining whether
a business has enough cash to fund its operations. The cash
budget of a company helps in determining how much cash the
company has left. This in turn helps the company in determining
whether they need to take on more debt for raising liquidity or
not. If a company does not have a sufficient cash budget, it can
issue bonds or take loans. For smaller companies, the cash
budget is very important. It helps in determining the amount of
credit a company can give out to its customers without having
to face any problems in liquidity. In times of high expenditure,
a cash budget helps a business in avoiding any unwanted
expenditure. This in turn helps in the prevention of any cash
shortage during the period. It also helps businesses in
prioritizing their bill payments in a budget period.
References
Doruk, Ö. T., & Ergün, B. (2019). The role of macroeconomic
constraints on cash conversion cycle: Evidence from the Turkish
manufacturing sector. Asia-Pacific Journal of Accounting &

6. Economics, 1-12.
Mishra, C. R. A (2018) STUDY ON BUDGET AND
BUDGETARY CONTROL: ANALYSIS OF CASH BUDGET.
Nwude, E. C., Agbo, E. I., & Ibe, C. (2018). Effect of cash
conversion cycle on the profitability of public listed insurance
companies. International Journal of Economics and Financial
Issues, 8(1), 111.
Zakari, M., & Saidu, S. (2016). The impact of cash conversion
cycle on firm profitability: evidence from Nigerian listed
telecommunication companies. Journal of Finance and
Accounting, 4(6), 342-350.
RESPONSE FOR THE DISCUSSION:
In your response to your classmates, consider comparing cash
generation techniques at your company versus his or her
company. Draw distinctions based on the industry and tell your
colleagues why those distinctions are necessary for the
management of cash flow. Below are additional suggestions on
how to respond to your classmates’ discussions:
· Ask a probing question, substantiated with additional
background information, evidence or research.
· Share an insight from having read your colleagues’ postings,
synthesizing the information to provide new perspectives.
· Offer and support an alternative perspective using readings
from the classroom or from your own research.
· Validate an idea with your own experience and additional
research.
· Make a suggestion based on additional evidence drawn from
readings or after synthesizing multiple postings.

7. · Expand on your colleagues’ postings by providing additional
insights or contrasting perspectives based on readings and
evidence.
Discussion_
Author: by Lavanya Katta
Working Capital Management is well known to most people in
retail organizations. In any business that is like small or
medium or large-scale sectors, people are focusing on working
capital management. In the economy, it is important to note all
the budget management things in the case of the cash
conversion cycle. Inventory is the company's main asset that it
converts into sales revenues in order to get more growth to the
organization. The rate at which an organization sells it is
inventory is an important aspect of its success. Investors
consider the inventory turnover rate by checking its sales rates
and the inventory is too low that kept the company in danger of
losing sales. The time-dependent life cycle of cash which is
used for an organization process is can be handled by the cash
conversion cycle. In current assets include bill payments like
receivables, work-in-process statements, and inventories.
Current liabilities include the bill payables and then the
organization grows up in real-time situations (NGUYEN, 2020).
Cash Conversion Cycle
As we all have to remember, that cash conversion days are a
results calculation. While cash conversion metrics serve as only
a proxy of the efficiency of cash flowing through the company,
we need to focus harder on what drives each component of cash
conversion days. Accordingly, we need to look at our billing
practices in order to the business plan in working capital
management. Based on the invoices, the management will get
billed quickly without errors. In most cases, we have to follow -
up on past dues on the days after they are late. In short, we need
to attack issues on what can drive cash conversion days upward
(Sarfraz, 2018).

8. Cash Budget
Within the next few sections to grant credit offering credit is a
way can demand cash considered to extremely common. When
an organization has been selling goods and services investment
is tied that is involved with granting credit are not trivial. The
obvious reason can extend credit to making an investment and
there exist is the chance to allow some delay in payment. From
an accounting perspective, the costs of granting credit will not
pay as per the view of the credit policy decision. Such
receivables before the delivery will have provided an idea that
involves a trade-off in between the costs of carrying the
receivables. They need to associate first based on a major
investment credit that can be including stimulating sales. Based
on the employee performances most of the people prefer to
make the choices among themselves as an executive (Gupta,
2019).
References
Gupta, R. K., & Gupta, H. (2019). Working Capital
Management & Finance: A HAND BOOK FOR BANKERS AND
FINANCE MANAGERS. Notion Press.
Khalid, R., Saif, T., Gondal, A. R., & Sarfraz, H. (2018).
Working capital management and profitability. Mediterranean
Journal of Basic and Applied Sciences (MJBAS), 2(2), 117-125.
NGUYEN, A. H., PHAM, H. T., & NGUYEN, H. T. (2020).
Impact of Working Capital Management on Firm's Profitability:
Empirical Evidence from Vietnam. The Journal of Asian
Finance, Economics, and Business, 7(3), 115-125.
RESPONSE FOR THE DISCUSSION:
In your response to your classmates, consider comparing cash
generation techniques at your company versus his or her
company. Draw distinctions based on the industry and tell your
colleagues why those distinctions are necessary for the
management of cash flow. Below are additional suggestions on

9. how to respond to your classmates’ discussions:
· Ask a probing question, substantiated with additional
background information, evidence or research.
· Share an insight from having read your colleagues’ postings,
synthesizing the information to provide new perspectives.
· Offer and support an alternative perspective using readings
from the classroom or from your own research.
· Validate an idea with your own experience and additional
research.
· Make a suggestion based on additional evidence drawn from
readings or after synthesizing multiple postings.
· Expand on your colleagues’ postings by providing additional
insights or contrasting perspectives based on readings and
evidence.
Author:Nikhil Kumar Podduturi
From applied practicum, it is noticeable that businesses depend
on adequate capital for their establishment and to operate their
activities. Primarily, the total capital of an organization can be
in a class entailing working capital and fixed capital. In most
organizations, it is a necessity to have provisions for fixed
capital to help in the purchasing of fixed assets such as land,
furniture, building, machinery, and many others. As opposed to
working capital that is required for current assets investment, it
is well known that fixed capital is usually invested for a long
duration. There are many scenarios in the organization where I
am employed that helped me understand how the various
components of working capital, such as the cash budget and
inventory management, are crucial in decision making.
Managing working capital efficiently ensures the overall

10. financial health and profitability for businesses. As such,
effective incorporation of working capital guarantees that an
organization is capable of maintaining adequate cash flow for
meeting the short-term debt obligations and operating costs. By
discussing how inventory management and cash budget
components are vital, one gets to know the importance of
working capital (Sharma, 2020).
Familiarization with inventory management played an essential
role in creating insights on how a business behaves in terms of
performance. In decision making, knowing about inventory
management was essential since stakeholders need to know all
the primary assets that can easily be converted into sales
revenues. In any enterprising activity, it is always vital to
ensure a business from downscaling. As such, inventory
management is indeed one of those components of working
capital that exhibits excellent benefits. There was one moment
in the organization where I was actively involved in measuring
the success of a business function through using metrics like the
number of products sold and the replenishment of inventory.
Luckily, we arrived at a high inventory of 20%, which meant
that the company was not in danger or threat of losing out on
sales. Notably, this was a reduction of 10%. This was quite
informative to decision making since it shows that the
performance of the company was okay and that there was no
adverse effect or risk on overall production and sales. In
essence, this is the point where I noted that inventory
management is a vital component of working capital and an
essential factor to overall business operations in overtly all
sectors of the economy for aiding decision making (Supramono,
2019).
A cash budget is a vital component of working capital that
keeps checking on whether the business is progressing,
slugging, or falling. There was a scenario a couple of months
ago where I was involved in the process of determining the cash
inflows and cash outflows. The aim was advisability in nature,
and this activity was done fortnightly as per the company’s

11. culture. This is where I confirmed that a cash budget resembles
a plan that estimates the future use of cash for a given task or
project. For example, in the latest exercise, we prepared a cash
budget which also included all the sources of cash and the
possible use of funds. In our cash budget, we arrived at net cash
of $57,000. Based on the businesses carried out by our
company, this value did not manifest any risk to operations. In
essence, this is an important component of the cash forecast.
In a nutshell, working components and fixed capital should be
well defined. The reason is that the management of
organizations needs to get information surrounding the
wellbeing of an organization. It also helps monitor the
productivity of primary and secondary operations. Cash budget
and inventory management as the components of working
capital play an integral part in decision making (Kieschnick,
2018).
References:
Chen, C., & Kieschnick, R. (2018). Bank credit and corporate
working capital management. Journal of Corporate Finance, 48,
579-596.
Nastiti, P. K. Y., Atahau, A. D. R., & Supramono, S. (2019).
Working capital management and its influence on profitability
and sustainable growth. Business: Theory and Practice, 20, 61-
68.
Seth, H., Chadha, S., Ruparel, N., Arora, P. K., & Sharma, S. K.
(2020). Assessing working capital management efficiency of
Indian manufacturing exporters. Managerial Finance.