Page 57 - FINAL CFA SLIDES DECEMBER 2018 DAY 11
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Session Unit 11:
38. Working Capital Management
LOS 38.c: Evaluate working capital effectiveness of a company based on its operating and cash conversion
cycles and compare the company’s effectiveness with that of peer companies., p. 84
tanties
LOS 38.d: Describe how different types of cash flows affect a company’s net daily cash position., p.84
Daily cash position refers to un-invested cash balances a firm has available to make routine
purchases and pay expenses as they come due; to manage its cash position effectively, a firm
should analyze its typical cash inflows and outflows by category and prepare forecasts over
• short-term (daily or weekly balances for the next several weeks),
• medium-term (monthly balances for the next year), and
• long-term time horizons.
Use these forecasts to identify periods when its cash balance may become low enough to
require short-term borrowing, or high enough to invest excess cash in short-term securities.
