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Credit is tight. Even though interest rates have declined recently, banks and other lenders are scrutinizing borrowers very carefully despite Administration efforts to motivate lending in order to stimulate the economy. The takeaway for most companies: to the maximum extent possible, meet cash requirements from operations. How does a company generate working capital from operations, or at least reduce its consumption? The three big components of working capital are: Inventory, as measured by inventory turns or days sales of inventory (DSI). Accounts receivable, as measured by days sales outstanding (DSO). Accounts payable, as measured by days payable outstanding (DPO).
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