Many giant corporations in the United States operate in large and complex markets which are marked by competition from different organizations and a demanding consumer base. It requires the establishment of competent structures to ensure an uninterrupted flow of goods, services, and capital between organizations and consumers. Supply chain and working capital management become vital in the flow of required goods and services for any company in the world.
According to Brigham and Ehrhardt (2015), corporations are rated based on the days of their working capital. Basically, working capital entails the amount of net operating capital needed per dollar on daily sales. There are two specific concerns when dealing with working capital management. First, the correct amount of working capital for specific accounts and the overall operations of the organization. Second, the mode in which management capital should be financed. Working capital management goes beyond finance as it involves the coordination of different departments such as information and communication and the engineering team in seeing that there is a smooth flow of goods and services and reducing the clogging of goods in the process inventory (Brigham & Ehrhardt, 2015). However, financial resources are important as they help in evaluating the effectiveness of the firms’ operations departments in comparison to other firms in the same industry.
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Supply chain entails a coordinated network of different organizations which have the responsibility of converting human resource especially labor and materials into finished goods which can be exchanged for financial resources through purchase by consumers. The most essential requirement for any supply chain is the flow of relevant information from the topmost node to the consumers. The information should be in a cycle in that the consumers’ feedback should reach the providers of goods and services.
There are ways through which the supply chain affects the accounting of an organization. For instance, when a company receives goods without paying immediately, the balance involved is known as account receivable (Brigham & Ehrhardt, 2015). In such a case, the inventories are reduced by the total cost of goods sold. The account receivables increases by the sales price. Lastly, the pre-tax profit is reached at thus tax status is adjusted then added to the retained balance.
References
Brigham, E. F. & Ehrhardt, M. C. (2015) . ACP Financial Theory & Practice . [VitalSource]. Retrieved from https://bookshelf.vitalsource.com/#/books/9781337682947/
