Net Operating Working Capital, Capital Budgeting, and Cash Budgets: A Teaching Example

Autor/in	Tuner, James A.
Titel	Net Operating Working Capital, Capital Budgeting, and Cash Budgets: A Teaching Example
Quelle	In: American Journal of Business Education, 9 (2016) 1, S.15-22 (8 Seiten) PDF als Volltext kostenfreie Datei Verfügbarkeit
Sprache	englisch
Dokumenttyp	gedruckt; online; Zeitschriftenaufsatz
ISSN	1942-2504
Schlagwörter	Business Education; Money Management; Budgeting; Budgets; Accounting; Student Surveys; Student Satisfaction; Business Administration Education; Teaching Methods + Suchen Sie Ihr Suchwort? Wirtschaftserziehung; Wirtschaftspädagogik; Finanzhaushalt; Abrechnung; Buchführung; Buchhaltung; Schülerbefragung; Teaching method; Lehrmethode; Unterrichtsmethode
Abstract	Many introductory finance texts present information on the capital budgeting process, including estimation of project cash flows. Typically, estimation of project cash flows begins with a calculation of net income. Getting from net income to cash flows requires accounting for non-cash items such as depreciation. Also important is the effect of changes in net operating working capital on cash flow. While students readily understand how to account for depreciation when calculating cash flow, they typically have much more difficulty understanding how and why changes in working capital affect cash flows. This paper develops a teaching example to show exactly how and why changes in net operating working capital affect cash flows. The example shows how to derive operating cash flows for a proposed project using the accrual accounting method and then shows a cash budget for the same project. Finally, the example shows that the discrepancy between the cash flows shown in the cash budget and the operating cash flows can be resolved by accounting for changes in working capital. A survey of students in an MBA managerial finance course indicates student satisfaction with the teaching example and gives evidence that students prefer the teaching example to explanations of the effect of working capital on project cash flows given in the assigned text. [This article was reprinted from "American Journal of Business Education" v6 n6 p641-648 2013.] (As Provided).
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Erfasst von	ERIC (Education Resources Information Center), Washington, DC
Update	2020/1/01