The Relationship Between Working Capital Management and Profitabilit

Working Capital is again in the red zone, dropping more than 75% from FY09 to FY10. However, the historic trend for the company is not very impressive, with working capital dropping as low as -$3 billion. The Operating Cash Flow Ratio is somewhat more reassuring, standing at 18.13 in FY10 from 14.67 a year earlier. This implies that for every dollar of current liability, the operations are providing $18 of revenue to cover the expense. However, operations are not primarily meant to cover just short term obligations, but also long term costs. Thus it cannot be justified that operations are very adequate to meet ST obligations.

Similarly, the working capital ratio is a metric that is utilized for the purpose of appraising the liquidity position of a commercial entity (Robinson). A review of the working capital of the two companies confirms that they had a positive working capital in 2014, but a negative one in 2015 (Yahoo.com). The outcome suggests that the liquidity position of the organization has deteriorated. Thus, the two commercial entities are likely to experience challenges with respect to meeting short-term obligations.

A business will run smoothly if the working capital is used effectively, hence the description “Working” capital. Managing this is a delicate balance and needs to be monitored regularly to make sure both debtors and creditors are on track. One of the most effective ways to manage this figure is to ensure debtors to the company pay their debts on time (or early if

Organizations with high liquidity of working capital may have low risk equaling low profitability. Capital cycle is significant because it keeps the organization’s short

This document is authorized for use only by Yen Ting Chen in FInancial Markets and Institutions taught by Nawal Ahmed Boston University from September 2014 to December 2014.

Finance: Evidence from the Field” in the Journal of Financial Economics Vol. 60, 2001, pp. 187-243.

Working capital is the measure of a company’s efficiency and operating liquidity. The working capital is usually calculated by

Liquidity ratio is the tool for measuring the ability of a company to repay the short-term debt. The working capital of the fiscal period of 2011-2013 continued to increase, this fluctuation showed that the operating funds of the Wendy’s company are growing at the same time. However, in 2013, the current ratio, acid-test ratio and account receivable turnover a sudden decreased. Later in 2014, the short-term debt repayment ability of the Wendy's became strong and steady, this caused a significant development of average collection period. According to the data shown below, the financial position of the Wendy's is lack

Lawrence Sports is a manufacturer of sporting goods facing a fiscal dilemma in the early spring of 2011. Between the months of March and April, the company would experience an impasse within the context of its Current Cash Conversion Cycle. Here, an improved strategy for working capital management is called for.

The Project Report is a summary of Study of some of the elements of Working Capital Management at the Heavy Engineering Division of Larsen & Toubro Limited (L&T, HED). The various aspects of these working capital elements have been studied. The Study of working capital management involved understanding of receivables, payables and to an extent inventory management. After a brief introduction to the nature of Business activity of Larsen & Toubro and its Business Division - Heavy Engineering Division, the report comprises a detailed comparison of Heavy Engineering Division's performance with its Indian and Foreign Competitors. The comparison is based on profitability, productivity and working

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

A company with a relaxed working capital policy would carry relatively large amounts of current assets in relation to their sales. It would be guarding against running out of stock or of running short of cash, or losing sales because of a restrictive credit policy. Working capital policy is reflected in a firm’s current ratio, quick ratio, turnover of cash and

The liquidity of a company is the ability to meet its loan obligations as it relates to its current assets and its current liabilities (Marshall, 2002). Appendix B shows that we have analyzed three important liquidity ratios: 1) Current Ration, 2) Acid Test, and 3) Working Capital. Of these three, the best indicators of liquidity, when trying to show trends, are the Acid test and the Current Ratio. A current ratio of 2 and an acid test of 1.0 are considered "adequate liquidity" (Marshall, 2002). Sample Company's Acid Test numbers for 2000 and 2001 were .84 and .79, and its Current Ratio numbers for 2000 and 2001 were 1.45 and 1.54. Each sets of these ratio figures indicate that Sample Company could possibility have some difficulties in meeting its financial obligations, so these numbers will be important to watch closely in the future.

Working or functioning capital is the extent at which the organization’s cotemporary possessions enhanced from the liabilities. In this scenario group A evaluate the financial statement of Wal-Mart that includes balance sheets, cash flow statements, and suggestion by the managerial administration along with the postscripts to the financial statements of account that needs to demonstrate how every existing resource as well as liability has influenced the tactics that are concerned with the cash management administration. Moreover perceiving the upcoming year’s prediction of Wal-Mart’s profitability or income would boost up by 20%, we then give a diversified suggestion concerning working

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.