Evaluating net investments in the operating working capital under certainty: The integrated approach to working capital management

• Authors: Aleksandra Szpulak
• Languages of publication: EN

Abstracts

EN

In day-to-day operations managers decide on a variety of working capital variables influencing the size of operating cash flows its timing and risk and therefore the firm’s value. This paper reveals the tool based on NPV criterion appropriate for evaluation of net effect the changes in working capital management have on the firm’s value. This research merge previous work on the applications of the NPV criterion in the field of working capital management within discounted cash flows framework (Lieber and Orgler, 1975; Sartoris and Hill, 1983; Kim and Chung, 1990; Arcelus and Srinivasan, 1993) and contributes to it by (i) including additional working capital decision variables: advance payments, labor costs and deferral of salaries payments, (ii) focusing on moments of outflows instead of moments of costs arising and (iii) it is designed to be applicable for discretionary type of business activity. As being value-based tool presented here is superior to well established financial ratios analysis usually suggested for assessing the efficiency of working capital management.

Keywords

EN

Working capital management; NPV criterion; cash flows framework

Discipline

• ECONOMICS: ECONOMICS

• Publisher: Prague Development Center, Czech Republic
• Journal: Business and Economic Horizons
• Year: 2015
• Volume: 11
• Issue: 1
• Pages: 28-40

Dates

published

2015-04-14

Contributors

author

Aleksandra Szpulak

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Identifiers

DOI

http://dx.doi.org/10.15208/beh.2015.03