Objective
This binds objective is mainly focuses on the management of operative seat of government within a company. In the boom years, jacket was used carelessly because there was plenty of capital available. short(p) thought was placed into spending the constant flow of capital. Today, capital needs to be spent and managed in a healthy thought out manner since the capital and credit nominate dried up. Customers are tightening their spending and companies are no long-term accepting late payments. The state of the economy has paved the way for a smarter strategy of management of capital. This article explores sise common erroneous beliefs companies make in managing capital.
Methodology
The first mistake is managing to the income instruction instead of the balance sheet. With the income statement, profitability may increase that with these results could be tainted with bad receivables from customers. The receivables from customers could never be self-collected and result in a loss to the company. Another mistake is awarding the sales force for growth alone. Salespeople try to harbor sales at any cost which includes giving longer payment plans and are unwilling to tract down these payments from customers which results in a loss to the company in the end.
Overemphasizing quality in performance is another problem with managing capital. This tends to slow down production process and locks up capital in the work in progress inventory. Another mistake is tying receivables to payables. Many companies reach the terms they are given by their suppliers to the terms they ecstasy their own customers. If their suppliers tighten terms, they try to cover the resulting cash skirt by tightening their own credit policies. Applying current and expeditious ratios is another commonly seen mistake. Bankers use these ratios as information to find out if a company can pay an issued loan. The problem is companies transfigure their capital to increase these ratios and create a misleading character to...If you want to get a full essay, order it on our website: Orderessay
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