Question
In studying the handling of cash in operations, one of the objectives we have is to ensure that we have enough cash to meet short
In studying the handling of cash in operations, one of the objectives we have is to ensure that we have enough cash to meet short term obligations and keep a minimal level of cash in reserve to ensure that operations would be able to continue for a specific period, even if sales and operations were adversely affected by conditions outside of the control of the company. There are specific strategies that have developed as a result of these objectives, to maximize cash flow. Among these are the strategies of encouraging collection of cash as quickly as possible from customers while at the same time delaying payment to vendors for as long as possible without incurring financial penalties. However, some sections of the business world view these practices as unethical, in that following those practices require others to act in a way that we ourselves are not acting. If you were the financial manager of a small business, would you advocate for the policy stated above and how would you address the ethical perspective articulated by those who criticize the approach?
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