Assignment 2 Working Capital

1055 WordsDec 19, 20145 Pages
Assignment 2: Working Capital Abstract 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 structures The selected companies that I have selected to compare are Google and…show more content…
(Morningstar.com) Improve working capital Improving working capital position, a company is able to compare from year to year any increase in revenue; increase in production due to a decrease in variable or fixed costs, increase in sales due to a new sales workforce and any increase in liabilities; new short term creditors, a higher accounts payable account due to the need to purchase new materials. A company can improve its working capital by trying to keep a healthy balance between the two accounts, cutting costs, and analyzing its current short-term debt in terms of how to decrease it or find alternative ways to avoid it such as restructuring production procedures. (Schroeder, el. 2014) Role of a Wall Street Analyst As Wall Street Analyst deciding which company to invest in I would determine whether the company is stable financially, investment returns and risks associated with the investments. Gross working capital means the amount invested in the current assets of the company.Net working capital means the difference between the current assets and current liabilities. If the current assets are more than the current liabilities, then it is positive working capital. Otherwise, it is negative working capital. Working capital is the measure of company's solvency, its ability to pay its suppliers without any delay. Considering these factors I would invest in Google since it has higher earnings per share and an investor is

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