Fin 534 Week 9 Discussion Essay

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"Working Capital Management" Please respond to the following: Examine the key reasons why a business may not want to hold too much or too little working capital. Provide two (2) examples that illustrate the consequences of either situation. The right level of working capital depends on the industry and the particular circumstances of the business. For example, businesses that only sell services, and do not need to pay cash for inventory need a lower level of working capital. Businesses that take a substantial amount of time to make of sell a product will need a higher level of working capital. It is important for businesses to work out the right level of working capital you will need. If the working capital is too high, the business has surplus funds which are not earning a return; and low may indicate that the business is facing financial difficulties. From the scenario, analyze TFC’s cash budget to determine key methods in which the budget may be optimized (e.g., by renegotiating terms and conditions on some of its payables, etc.). If you believe that there is room for improvement, recommend key strategies for TFC to use in order to optimize its cash budget. If you do not believe that this is the case, provide a rationale for your response. The cash budget is one of the primary tools used in short-term financial planning in order to plan for cash flow. It is often developed on a month-by-month basis. A good cash budget allows the owner to see short-term financial needs and opportunities for the business. For example, in one month, TFC may have extra cash and may be able to save some money, or take advantage of a bargain in the marketplace. Another month, TFC may have a shortfall and have to withdraw some money from savings or even apply for a short-term bank loan to cover its needs. TFC should plan for a cash budget by determining what period of time

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