ctices to work ing capital management. Although working capital is typically financed from long term sources, it is used for short term pur poses, and, where long term sources cannot provide the required working capital, the necessary capital must be generated through 4short term borrowing. Further, although the commercial prac tices within an industry dictate, in general, the amount of working capital a firm must have, the specific credit and col lection policies and systems implemented by a firm, together with the ways in which these policies and systems are managed, also have significant impacts on the working capital position, and, hence, the liquidity position, of a firm.
As an example, consider a wholesale supplier, such as the one mentioned in the earlier illustration, who expects accounts to be paid in full within thirty days of a sale. This expecta tion of payment within thirty days of a sale is, in effect, a part of the credit and collection policy of the firm, and it is upon this policy that the
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