Current Asset Management. 7. Chapter Outline. What is current asset management Cash management and its importance Management of marketable securities Accounts receivable and inventory management Inventory management and policy decisions required Liquidity vis-à-vis returns.
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Current Asset Management
Accounts receivable = Sales = $10,000 = $1,667
EOQ = 2SO ;
S = Total sales in units
O = Ordering cost for each order
C = Carrying cost per unit in dollars
EOQ = 2SO = 2 X 2,000 X $8U = $32,000 = 160,000
C $0.20 $0.20
= 400 units
Average inventory = EOQ + Safety stock
Average inventory = 400 + 50
The inventory carrying costs will now increase by $50
Carrying costs = Average inventory in units × Carrying cost per unit
= 250 × $0.20 = $50