Sichuan Phosphorus Working Capital Management Case Studies

With the advance of economic globalization, the complexity and uncertainty of business environment is becoming bigger and bigger, so does the challenges facing by the firm's sustainable development. As the working capital turnover likes the blood circulation for firm's development, finance manager always pay special attention on them. Many empirical studies have confirmed the positive correlation between working capital managerial efficiency and performance. Usually, working capital is defined the difference between current assets and current liabilities, so the examining of the effectiveness of working capital management must be based on aspects of risk (short-term liquidity) and revenue (current asset turnover) .Chuanlin Corporation is a phosphorus chemical manufacturing firm, and also experienced ups and downs in 2008. According to the company's balance sheet of 2006 to 2008, we know that the ratios of accounts receivable, inventories, cash and cash equivalents to total assets respectively average at 26.2%, 12.4%, 17.5%, which illustrates important impacts of working capital management on business performance. And the management of accounts receivable needs to be improved especially.Based on the sorting of theories and practices of working capital management in recent years, and the characteristics of phosphorus chemical industry and Chuanlin Corporation, this paper established an analysis system for working capital management, and mainly studied the relative advantages and disadvantages through comparing with company's historical development and a leading rival firm with ratio and comparative analysis. Finally, the paper raised some proposals on how to improve the working capital management, such as how to conduct the monthly calculation and tracking of accounts receivable's turnover from the manager's point of view.