A business's financial health depends heavily on its short-term assets, such as inventory and Accounts Receivable (A/R), along with short-term liabilities, such as Accounts Payable (A/P). If these elements are managed well, then the business will have the cash to invest in finding potential customers, developing new products, and hiring new talent. We refer to these three pivotal financial measurements as working capital.
We can find inventory, A/R, and A/P, as separate line items in the balance sheet that we created for our financial perspective in a previous chapter. However, there is also a series of additional analyses that all three have in common. For example, the analysis of the average number of days that a product is in inventory, a customer takes to pay an invoice, or the business takes to pay a vendor invoice requires the same type of data model and formulation. We can also make this information more actionable if we include it in a product...