A company can manage their working capital in many different ways. One way would be to use trade credit facilities where the company canpurchase product or services and then pay the supplier at a later date. A company could reduce credit sales and reduce the amount of time for account receivables. They also could use short-term loans from the bank, or discount their account receivables which would be selling their unpaid account receivables to another company at a discount rate. Customer advance is another method to raise capital quickly and without much cost.

The strategy I chose to increase cash on hand is to negotiate with suppliers to increase account payables so I would have more time to raise capital to pay. At the same time I would negotiate with my clients and reduce the time period for accounts receivable. This allows the company to have more working capital and know if they need to implement other measures to raise capital for the bills due. This also keeps the company from not being able to pay their bills due to customers not paying the company on time. I use this strategy in my everyday life. With my credit card I can purchase things for my family and even though my current balance may be $5000, my last statement is $3500, which means I effectively get to borrow $1500 interest free for the month, which lets me not worry about over drafting from other bills such as the mortgage.

what's your opinion on the abvoe statement?

Answer rating: 100% (QA)

The strategy you outlined to manage working capital by negotiating with suppliers to increase account payables and reducing the time period for accoun... View the full answer