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Betty Singer was recently promoted to senior vice president and assistant to the CFO at Californian Alternative Products (CAP). In her new position, Betty is

Betty Singer was recently promoted to senior vice president and assistant to the CFO at Californian Alternative Products (CAP). In her new position, Betty is responsible for managing CAPs working capital, which requires her to make decisions about which working capital investment and financing policies the firm should follow. In a meeting with department heads a couple of days ago, CAPs CEO stated that he thought working capital management has been handled poorly in the past, and he thinks substantial changes should be made in Bettys department to improve its efficiency. Although he blamed her predecessor, the comments were clearly directed at Betty and the members of her department. As a result, Betty felt that she should evaluate the current working capital policy, and make any necessary changes. Because she is fairly new to her position, Betty thought it would be a good idea to meet with others who are more experienced to see how they developed and are now managing their working capital policies. One of the persons who offered Betty some ideas is Raymond, a close friend of hers who works at Financial Resources Efficiency Experts (FREE), which is a subsidiary of the commercial bank that provides cash management services to CAP. Raymond suggested that CAP consider outsourcing its working capital management functions to FREE. He explained that FREE had recently developed a new software platform that provides the services Betty needs to improve the efficiency of CAPs working capital management. Raymond also explained that although cash management and working capital management services are offered through other banks, the services that FREE offers are substantially superior to similar services from other companies. Other than telling her that the annual cost was substantial, Raymond provided Betty with few details about FREEs services. In reality, Betty knows nothing about working capital services banks offer, other than the information that Raymond provided her. But, because Raymond is a friend and his description of FREEs services was intriguing, she decided to investigate whether it would be appropriate for CAP to outsource its working capital management. When she arrived at work this morning, Betty was told that she must clean up CAPs working capital position immediately. Unfortunately, Betty hasnt had a chance to collect more information about the working capital management services offered by banks. Even so, she has a gut feeling that it might be a good idea for CAP to outsource some of its working capital management functions. As a result, Betty called Raymond and asked him how she could learn more about FREEs services in a short time period. Raymond told her that FREE presents a conference each year at which invited participants discuss various aspects of cash and working capital management. The topics that are covered at the conference range from the basics of cash management to more complex topics involving holistic working capital management. The conference, which is scheduled for next week, seems to be exactly what Betty needs to become more informed about the advantages and disadvantages of outsourcing CAPs working capital management functions. As a result, she asked Raymond to provide her with specific information about the conference, including the costs, specific session topics, and so forth. One hour ago, Raymond called with details about the FREE conference. The seven-day conference will be held aboard a luxury cruise ship as it sails to exotic ports throughout the Mediterranean Sea. The sessions are scheduled during the time the ship is traveling from one port to another, which generally takes four or five hours. When the ship is in port, the conference coordinator has arranged for conference participants to take tours, play golf and tennis, lounge at the beach, and enjoy the local entertainment. The conference sounds great to Betty because she can work and relax at the same time. One thing bothers her, howeverall of the costs, including recreation, relaxation, and entertainment activities will be paid by FREE. Betty is convinced that she will get the information she needs at the FREE conference. But she is concerned that attending the conference might be considered a conflict of interest, because she knows that FREE representatives will try to convince her to use its services. She also knows that Raymond will earn substantial commissions if CAP uses FREEs service. And, she is aware that Raymond needs the money, because his wife was recently laid off due to a downsizing at the firm where she worked for 15 years. Further, Betty is concerned that material/information she receives at the conference will be one-sided (biased), favoring of the services offered by FREE . If she is going to attend the conference, Betty must register today. As a result, she needs to make a decision quickly. What should she do? What would you do if you were Betty? Discuss the goal of effective cash management and how, the cash budget, techniques that exist to accelerate cash receipts, and cash disbursement controls should be employed to develop an optimal cash management policy in 200 words.

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