Trends Analysis in Working Capital Management

Even though most of these expenses are not of big magnitude their value can add up and affect the company’s finances. Some of these items are accrued time for employees, bonuses, benefits, utilities, improvements and taxes. Some additional sources of working capital include; cash reserves, profits, equity loans, line of credit, and long term loans.

For this week’s reflection, please write three complete and well composed paragraphs and, in your own words (do not quote from a book or website) explain what working capital is and why it is important for a business. As an example, describe a business that operates where you live and describe how knowing what the working capital of that company would be useful to the business leaders of that company and to outside investors.

Analyze the fundamental differences between the working capital structures and components for each chosen company, and speculate upon the main reasons why such differences exist.

Based on information given, we established the free cash flows from operations for Torrington, for the period 1999 to 2007. We made the assumption that net working capital was 7% of sales for Torrington, based on historic patterns. From this assumption, we found “Change in Net Working Capital” for the selected years. Next, we chose a value for “Capital Expenditures”, again based on historic patterns. From this we computed the “Free Cash Flows to the Firm”.

To determine the working capital strategy Boeing, Co. should shift to, it is important to determine which strategy they have been using for the last five years. The decrease from 28.55% to 6.63% in five years seems to resemble an aggressive approach. To know for sure lets determine the amount of financial leverage the firm is using. This can be done using financial leverage ratios. According to Emery, Finnerty, and Stowe, the most commonly used ratios are the debt ratio, debt/equity ratio, and the equity multiplier (2007, p. 64). The debt ratio is simply: TOTAL DEBT/TOTAL ASSETS = DEBT RATIO PERCENTAGE. These ratios are different representations of the same information, and if anyone of them is known the other two can be determined

When viewing the numbers for fixed asset ratio, it can be said that the management department is not using their assets to its fullest capabilities. Fixed asset ration is .4 below average of the industry, along with the capital ratio. Since the total asset management ratio, is somewhat higher than average, it can be viewed that they are using the assets correctly. Sales to working capital ratio and capital intensity ratio both show that management is running the firm great, and that the assets are being used to their

The Corporate Finance course has helped me, as a student, gain intelligence to make informed decisions upon analyzing the details for Sunflower Nutraceuticals (SNC). These decisions will influence the company’s overall growth annually. In addition to various details of the SNC Company I have also made various decisions in each of the phases of SNC’s simulation which has an estimated values to figure out the results. This paper also explains how SNC’s decisions are influenced with regards to the working capital followed with the final step of evaluating the general affects associated with the limited

Working Capital is defined as “a measure of both a company 's efficiency and its short-term financial health. (Investopedia, 2016.)” Having an efficient working capital can make or break a business’s success. To expand on our experience with working capital, we ran the Harvard Business Publication Working Capital Simulation. In our simulation, we are co-owners of Sunflower Nutraceuticals (SNC), “an internet-based, direct-to-consumer distributor and retailer of dietary supplements, including vitamins, minerals, and herbs for women (Harvard Business Publication, 2014.)”, looking to create more working capital for the company so Sunflower Nutraceuticals can expand. We were told that SNC is breaking even with a flat annual sales growth on total revenues of $10 million. The company has struggled to finance the payroll, and more than once overdrawn on the line of credit in the past. SNC keeps the minimum amount of cash on hand ($300,000) to meet its operational needs. A national bank, Miami Dade Merchant 's Bank (MDM), has issued a line of credit with restrictive covenants; credit limit of $3,200,000, and rate of 8%. We were also provided with a forecast of the global nutraceuticals market. In 2010 the market worth was approximately $128.6 billion and forecasted to grow at a compound annual growth rate of 4.9% and reach $180.1 billion by 2017 (Harvard Business Publication, 2014.). After being given all of this information, it was up to us to make

On the other hand, the company has been growing constantly. In deed, according to the net income estimation for 2007 (see Table 7) the company increases its profits $25 thousand dollars more than the previous year. This is an evidence of how the company is been management and of its willing to grow year after year. Nevertheless, the first quarter of 2007 the working capital only has increased by $7 thousand dollars, which is the difference between the current assets and current liabilities but the importance of this is that according to the rotation on receivables and payable accounts, shown in Table 5 and 10, leads us to the conclusion that the company will have to pay its suppliers

After reviewing the Working Capital Simulation, I have summarized the various phases, examined why SNC made several decisions and how their decisions were based on the existing working capital. The selections were key determinants that affected SNC 's working capital and had effects that are associated with limited access to financing (Harvard Business Publishing, 2014)..

Analysing the historical values of the operating margins from the Income Statement, we forecast values for the 2007-2009 period. The executives of BKI expect the firm to achieve operating margins at least as high as the historical ones. Thus, we took averages and slightly adjusted them toward higher values. Since the declining tendency in the last three years was cause by integration costs and inventory write-downs associated with acquisitions, which already have been completed. To the EBIT, estimated by using those margins, subtract the taxes, Capex, adjust for Depreciation, Amortization and change in Working capital. The capital expenditures were just over $10m on average per year. The company is expecting the Capex remain modest. Thus, we assumed a Capex of $10m for the next three years. We estimated Net Working Capital by using the average ratio of NWC/Net income of the last three years.

As a shrewd financial analyst you observe that the net working capital of the firm has typically been about 20% of the annual revenues. How would you incorporate this observation into the analysis?

Alan Litchman and Laura B. Trust, Co-Presidents of Finagle a Bagel, own a bagel business in Boston (Parrino, Kidwell, Bates, 2012). Alan and Laura met in business school and after gaining business experience in other industries they purchased the bagel business with the intent of growing it as much as possible. They have two primary target markets: 1) retail stores and 2) wholesale accounts with large institutions. In this paper, we will briefly discuss a few of the strategies they used to manage their working capital.

In this paper I’ll analyze the fundamental differences between the working capital structures and components for Google and Oracle, and speculate upon the main reasons why such differences exist; how each company could improve its working capital positions. As a Wall Street Analyst who has to recommend one of the companies as an investment to a company’s clients; based solely on that company’s working capital; as an Investment Banker who has to recommend loaning a substantial amount of capital to one company based solely on that company’s working capital.

Working capital is the amount that a company’s current assets exceeds its current liabilities and is a measure of the company’s ability to pay its debts and liabilities if they were to all become due in the near future. Assets and liabilities are considered “current” if the asset is able to be converted into cash within one year and if the liability must be paid within one year (Bagul, 2014). Both Google (now Alphabet) and Microsoft hold working capital in sums that significantly exceed $50 million dollars, $61 million and $74 million respectively. These large sums are on account of the fact that both companies hold higher than normal levels of cash and investments (securities) when compared to most large corporations. While there is no set goal for how much working capital a company should hold, these numbers provide us with two clear conclusions. First, neither Google nor Microsoft currently have any risk of not being able to pay their debts on the short-term horizon because they have way more than enough current assets to cover even the most dramatic call of their debts. On the other hand, this high amount of working capital shows that the company could be investing its assets in a more efficient manner, rather than allowing them to sit unutilized.