Hello, this is Huw Morgan from the Alliance Manchester Business School.
This is the ninth talk in the series of lectures on accounting records.
This session follows on from the previous session on working capital management,
looking at controls Shaun can add to his accounting records
for inventory and trade receivables to manage liquidity risk.
We also consider how to value both types of asset,
particularly where there are uncertainties in their ability
to generate adequate future economic benefits.
In session eight, Shaun's statement of
financial position and income statement was analysed
to assess the businesses working capital efficiency, using the cash-conversion period.
Shaun held on to inventory for about six weeks, quite a concern
given most of his inventory is perishable ingredients,
fruit smoothies, and health drinks.
Shaun's business also allowed customers to delay
paying him for almost three months on average,
which raises concerns on their recoverability,
a potential for bad debts,
as well as the impact this has on liquidity.