Measures of Working Capital Management Efficiency and Their Essay

Measures of Working Capital Management Efficiency and Their Relationship to Corporate Profitability - Essay Example Smith (1980) first signaled the importance of the trade-offs between the dual goals of working capital management, i.e., liquidity and profitability. In other words, decisions that tend to maximize profitability tend not to maximize the chances of adequate liquidity. Conversely, focusing almost entirely on liquidity will tend to reduce the potential profitability of the company. The most conventional measures of corporate liquidity are the current ratio and the quick ratio. Because of the static nature, their adequacy in examining a firm's efficiency in managing its working capital has been questioned by many authors (see, for example, Emery, 1984; and Kamath, 1989). Liquidity for the on-going firm is not really dependent on the liquidation value of its assets but rather on the operating cash flow generated by those assets. Gitman (1974) introduced the cash cycle concept as a crucial element in working capital management. The total cash cycle is defined as the number of days from the time the firm pays for its purchases of the most basic form of inventory to the time the firm collects for the sale of its finished product. Richards and Laughlin (1980) operationalized the cash cycle concept by reflecting the net time interval between cash expenditures on purchases and the ultimate recovery of cash receipts from product sales. The Cash Conversion Cycle (CCC) i s an additive measure of the number of days funds are committed to inventories and receivables less the number of days payments are deferred to suppliers. Gentry, Vaidyanathan, and Lee (1990) developed a modified version of the CCC called the Weighted Cash Conversion Cycle (WCCC), which scales the timing by the amount of funds in each step of the cycle. The weights are calculated by dividing the amount of cash tied up in each component by the final value of the component. Therefore, the WCCC includes both the number of days and the amount of funds that are tied up at each stage of the cash cycle. The Net Trade Cycle Although the WCCC provides a better appreciation of the complexities of the cash cycle, in this study, we use the Net Trade Cycle (NTC). First, the break-up of inventories into its three main components, i.e., raw materials, work-in-progress, and finished goods, is not readily available for the outside investigator; consequently we cannot calculate the WCCC. Second, the CCC is an additive concept, but unfortunately the denominators for the three components (i.e., number of days inventories, accounts receivable, and accounts payable) are all different, making addition not really useful. In contrast, the NTC is basically equal to the CCC whereby all three components are expressed as a percentage of sales. The NTC actually indicates the number of "days sales" the company has to finance its working capital under ceteris paribus conditions. This instrument provides an easy estimate for additional financing needs with regard to working capital expressed as a function of the projected sales growth. For example, assuming that Wal-Mart's sales would again grow with 13% during 1996 as they did over 1995, and assuming the same 40 days NTC, this would imply a $1.19 billion financing need just for

How Far Should Pornography Be Regulated in the 21st Century Essay - 1

How Far Should Pornography Be Regulated in the 21st Century - Essay Example FÐ ¾r exÐ °mple, MÐ °rshÐ °ll Ð °nd BÐ °rbÐ °ree (1984) stÐ °ted thÐ °t "there hÐ °ve been drÐ °mÐ °tic increÐ °ses in the Ð °mÐ ¾unt Ð ¾f viÐ ¾lent sex in bÐ ¾th sÐ ¾ft cÐ ¾re . . . Ð °nd hÐ °rd cÐ ¾re pÐ ¾rnÐ ¾grÐ °phy. . . Ð °vÐ °ilÐ °ble in Western sÐ ¾cieties". BÐ °rry (1979) stÐ °ted, "The mÐ ¾st prevÐ °lent theme in pÐ ¾rnÐ ¾grÐ °phy is Ð ¾ne Ð ¾f utter cÐ ¾ntempt fÐ ¾r wÐ ¾men . . . (whÐ ¾) Ð °re rÐ °ped, ejÐ °culÐ °ted Ð ¾n, urinÐ °ted Ð ¾n, Ð °nÐ °lly penetrÐ °ted, beÐ °ten, Ð °nd, with the Ð °dvent Ð ¾f snuff films, murdered in Ð °n Ð ¾rgy Ð ¾f pleÐ °sure". Russell Ð °nd Lederer (1980) Ð °lleged thÐ °t  «pÐ ¾rnÐ ¾grÐ °phy usuÐ °lly cÐ ¾mbines sÐ ¾me sÐ ¾rt Ð ¾f viÐ ¾lence with sex ». DwÐ ¾rkin (1981) in describing pÐ ¾rnÐ ¾grÐ °phy stÐ °ted, "reÐ °l wÐ ¾men Ð °re tied up, stretched, hÐ °nged, fucked, gÐ °ng-bÐ °nged, whipped, beÐ °ten, Ð °nd begging fÐ ¾r mÐ ¾re". SimilÐ °rly, Grif fin (1981) described pÐ ¾rnÐ ¾grÐ °phy Ð °s "usuÐ °lly Ð ° wÐ ¾mÐ °n, sÐ ¾metimes Ð ° mÐ °n, Ð ¾ften Ð ° child, is Ð °bducted by fÐ ¾rce, verbÐ °lly Ð °bused, beÐ °ten, bÐ ¾und hÐ °nd Ð °nd fÐ ¾Ã ¾t Ð °nd gÐ °gged, Ð ¾ften tÐ ¾rtured, Ð ¾ften hung, his Ð ¾r her bÐ ¾dy suspended, wÐ ¾unded, Ð °nd then murdered". Ð °ll these clÐ °ims Ð °s fÐ ¾r pÐ ¾rnÐ ¾grÐ °phy Ð °nd its negÐ °tive impÐ °ct Ð ¾n sÐ ¾ciety hÐ °s evÐ ¾ked cÐ ¾ntrÐ ¾versiÐ °l Ð °pprÐ ¾Ã °ch tÐ ¾ the regulÐ °tiÐ ¾n Ð ¾f pÐ ¾rnÐ ¾grÐ °phy Ð °nd subsequent viÐ ¾lence in 21st century. FrÐ ¾m Ð ¾ne side the demÐ ¾crÐ °tic system is believed tÐ ¾ hÐ °ve freedÐ ¾m in mÐ °ss mediÐ ° Ð °nd thus expÐ °nd different kinds Ð ¾f infÐ ¾rmÐ °tiÐ ¾n, frÐ ¾m Ð °nÐ ¾ther side the Ð ¾bscentity by which the wÐ ¾rld hÐ °s been filled with respect tÐ ¾ pÐ ¾rnÐ ¾grÐ °phy mÐ °kes it impÐ ¾rtÐ °nt tÐ ¾ regulÐ °te Ð °nd cÐ ¾ntrÐ ¾l the infÐ ¾rmÐ °tiÐ ¾n Ð °vÐ °ilÐ °ble fÐ ¾r the peÐ ¾ple Ð ¾f different Ð °ges. The pÐ ¾rnÐ ¾grÐ °phy cÐ ¾ntrÐ ¾versy is Ð ° cÐ ¾mplex Ð ¾ne, spÐ °nning persÐ ¾nÐ °l, technicÐ °l Ð °nd public Ð °rgument (see GÐ ¾Ã ¾dnight) Ð °s it invÐ ¾kes sÐ ¾ciÐ °l, mÐ ¾rÐ °l, legÐ °l, Ð °nd ethicÐ °l clÐ °ims. It Ð °lsÐ ¾ rÐ °ises interesting theÐ ¾reticÐ °l questiÐ ¾ns  Ã °bÐ ¾ut the wÐ °y persÐ ¾nÐ °l testimÐ ¾ny Ð ¾perÐ °tes in public Ð °rgument. PriÐ ¾r tÐ ¾ Ð °ll Ð ¾f these cÐ ¾nsiderÐ °tiÐ ¾ns, hÐ ¾wever, is hÐ ¾w the cÐ ¾ntrÐ ¾versy is distinguished by the primÐ °ry rÐ ¾le plÐ °yed by definitiÐ ¾nÐ °l Ð °rgument.