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Flashcards in Operations Management Deck (3):

Spontaneous credit

results from trade accounts payable


Float period



Aggressive working capital policy

Focuses on HIGH profitability despite facing the cost of high risk and low liquidity

Meaning focuses on REDUCING current assets as much as possible (hence, the risk of LOW liquidity).

Financing permanent inventory build up with long term debt is NOT an aggressive approach because this move does NOT reduce your current assets. Inventory is still on the books and LTD does not hit the current liabilities (the other half of Working Capital).