Essay Available:
Pages:
2 pages/≈550 words
Sources:
2
Style:
APA
Subject:
Accounting, Finance, SPSS
Type:
Essay
Language:
English (U.S.)
Document:
MS Word
Date:
Total cost:
$ 9.36
Topic:
Microsoft Corporation’s Working Capital Management
Essay Instructions:
Overview
Organizations must manage their working capital management to meet their short-term obligations. It's important to consider working capital problems such as excess credit or a low cash balance. This is especially important when you propose new projects or investments. A business can get a competitive advantage in the marketplace if they manage these issues early.
Directions
Look at the business you selected for Project Two and the financial statements for the most recent fiscal quarter. Complete the calculations for determining working capital. Then tell how the financial statements help determine financial health.
Specifically, you must address the following rubric criteria:
- Financial Statements: Explain the various financial statements needed to calculate a business’s working capital. Also explain how to use each financial statement for the calculation. Give examples to support your claims.
- Working Capital’s Role: Discuss how businesses that manage their working capital well stay healthy.
- Working Capital Interpretation: Use the correct formula to calculate working capital. Then discuss the business’s current financial liquidity position.
- For example, does the business have enough working capital ready to address bills to suppliers? Will there be potential cash inflow at the end of the year?
- Working Capital Management Trend: Discuss the business’s trend in how they manage their working capital.
- Remember that financial statements reflect a specific period of time and the value of the business’s working capital during that period. Use Mergent Online to find financial statements for earlier periods. This will give you a better sense of the business’s trend.
What to Submit
Your submission should be a 2- to 3-page Word document with 12-point Times New Roman font, double spacing, and one-inch margins. Any sources should be cited according to APA style.
Essay Sample Content Preview:
Microsoft Corporation’s Working Capital Management
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Microsoft Corporation’s Working Capital Management
Financial Statements
The Various Financial Statements Needed to Calculate a Business’s Working Capital
Balance sheets are financial statements containing the particulars of organizations' assets and liabilities at certain periods. Haralayya (2021) asserts that "the financial condition of the business concern can be found out by preparing a comparative balance sheet" (p.187). Managers need a corporation's balance sheet to help them calculate its working capital by subtracting current liabilities from the current assets stated in the statement. For example, companies X and Y's total current assets for the year ending 31st December 2020 were $160,000,000,000 and $180,000,000,000, respectively. The current liabilities for X and Y were $90,000,000,000 and $80,000,000,000, respectively. Therefore, the firms' working capitals were as follows. Company’s X working capital = $160,000,000,000 - $90,000,000,000 = $70,000,000,000. Company’s X working capital = $180,000,000,000 - $80,000,000,000 = $100,000,000,000. Both corporations had positive working capital because they had enough current assets to cover their short-term monetary obligations.
Working Capital’s Role
How Businesses that Manage their Working Capital Well Stay Healthy
Healthy businesses manage their working capital well by avoiding stockpiling, decreasing inventories that move slowly, and increasing stock turnover cycles. According to Boisjoly et al. (2020, p. 1), companies “have discovered that there are important cash flow streams available to them if they aggressively manage their working capital accounts.” Therefore, firms with proper working capital management have adequate cash to invest in other profitable projects. Inventory is an asset in the working capital formula. However, keeping less stock means that a business has more freed-up cash flow, hence will stay healthy.
Working Capital Interpretation
The Business’s Current Financial Liquidity Position
Microsoft Corporation’s working capital for the quarters ending 30th June 2022 and 2021 are calculated using the following formula. Working capital = total current assets - total current liabilities. The Corporation’s total current assets for the quarters ending 30th June 2022, and 2021 were $169,684,000,000 and $184,406,000,000, respectively. The current liabilities for 2022 and 2021 were $95,082,000,000 and $88,657,000...
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