What is the significance to working capital management of matching sales and production?
An organization can keep a minimum level of inventory if the sales and production are matchedThis helps in managing the working capital working capital with ease.
The process of managing
the current assets and liabilities of a company is called working capital management. This process requires the management to efficiently utilize its resources to increase its earnings.
Matching of sales and production will ensure that the company can keep a minimum balance of inventory. This will result in low investment in the company’s inventory and lower the financing costs.
Neon Light Company of Kansas City ships lamps and lighting appliances throughout the country. Ms. Neon has determined that through the establishment of local collection centers around the country, she can speed up the collection of payments by three days. Furthermore, the cash management department of her bank has indicated to her that she can defer her payments on her accounts by one-half day without affecting suppliers. The bank has a remote disbursement center in Florida.
b. If Neon Light Company can earn 6 percent per annum on freed-up funds, how much will the income be?
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