Reference no: EM133011498

Saltfleet is a supply company which operates through its stores and depots throughout the UK. Its subsidiary, Irby, manufactures scaffolding and security fences.

Saltfleet's finance director has been reviewing its working capital management and is considering several proposals which he hopes will increase efficiency and effectiveness in this area:

1. appointing a credit controller to oversee credit management in the stores and depots;
2. appointing a factor to take over the sales administration and trade receivables management of Irby;
3. investing short-term cash surpluses on the London Stock Exchange. The finance director is interested in buying shares of a small company recently tipped by an investment magazine.

Problem (a) Critically discuss the importance of credit management to a company like Saltfleet, explaining the areas to be addressed by a credit management policy.

Problem (b) Distinguish between factoring and invoice discounting and explain the benefits which Irby may receive from a factoring company.

Problem (c) Discuss whether Saltfleet should invest short-term cash surpluses on the London Stock Exchange.
[Head, Antony/Watson, Denzil. Corporate Finance 8th edition Enhanced eBook]