Essays on Working Capital Management - Booker Group Plc Case Study

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The paper "Working Capital Management - Booker Group Plc" is a perfect example of a finance and accounting case study. The focus of the paper has been on examining the operating cash cycle of three companies; TOROTRAK- operates under the automobiles and parts sector; Distil Plc-operates under the beverages industry and Booker Group Plc-which operates under the food & drug retailers sector. Booker Group Plc’ s operating cash cycle is favourable in comparison to the others, which is an indication that it enjoys a substantial period for which it can invest cash gathered as sales revenues before paying off its bills.

This is attributed to the fact that it operates under a sector with a short shelf life hence do not extend credit terms to customers who are expected to pay for products on cash terms. It is also a result of efficient management policies in relation to purchasing and investment decisions. Introduction Working capital management is an aspect that remains relevant and paramount in any business operations especially because it has direct effects on their profitability, risk and value as a whole. The notion related to maintaining a high level of inventories helps in reducing the overall cost of possible interruptions within the production process, reduction in supply costs and in most the other cases prevents businesses from the risks associated with price fluctuations (Ali & Ali, 2012).

However, it can also result in the imminent loss of business as a result of limited products. Certainly, it fosters trade-credit platforms so that products are sold even in times of demand given that customers are incentivized. In essence, research indicates that businesses that opt to invest intensively in inventories and trade credit are exposed to a significant reduction of profitability capacities (Marttonen, Viskari, & Kä rri, 2014).

Thus, it means that when management opts to invest greatly in current assets; it might result to lower risk as well as its profitability capacity. One of the most fundamental ways for which management can check on their efficiency in relation to capital management is through the adoption of an operating cash cycle model.

References

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