It appears that George is running a profitable business. George is aware you are in an MBA Managerial Finance class and comes to you for advice on his working capital practices. More specifically...

Running Head: CORPORATE FINANCE        1
CORPORATE FINANCE        2
CORPORATE FINANCE
A CASE STUDY OF GEORGE’S TRAINS
Table of Contents
George’s Working Capital Practices and Capital Budgeting Analysis Techniques    3
Potential Pitfalls in George’s Capital Budgeting Practices    3
Cash Flow Statement for George’s Trains and Recommendations    4
References    6
George’s Working Capital Practices and Capital Budgeting Analysis Techniques
From the case study, it can be understood that George is having ample cash flow to manage his business. He is trying to manage his loans by cutting down the expenses. One of the best part of George’s business is limited inventory. He follows the practice of ordering 6 units of a product rather than 12 and reorders the same when the inventory level reaches one. He anticipates the demand in advance based on last year trend and orders accordingly. According to Almazan, Chen and Titman (2017), effective inventory management helps in reducing the working capital.
In addition to that, reducing the level of inventory reduces the cost of carrying excess inventory along with reducing the loss of inventory due to funds being blocked in the inventory. It can also be observed that George is using the funds of third party to run his business. His businesses well as the building is financed by bank as he had shortage of funds to invest in the business. George had purchased the building, as he did not want to shift his shop to any other place.
However, he had to opt for a bank loan to finance the same. This has led to increase in the revenue from the business along with keeping in touch with the existing customers. George has also expanded his product...