Working Capital Strategies for Microsoft Essay

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Working Capital Strategies


Forecasted If Microsoft forecasted revenue increase by 20 percent’s for the upcoming year, several parts of the annual report will be affected by the 20% increase forecast. First of all, the income statements will alter their revenues from 16,195 million dollars to 19,434 million dollars. Revenue is not the only thing that changes since there are other expenses that need to be changed. For example in the income statement, the operating expenses will not have an adjustment, and that includes; research and development, sales and marketing, and general and administrative these accounts will stay constant because only the revenues increase by 20 percent. However, if revenue increases 20 percent, the cost …show more content…

Therefore, Microsoft will either continue working in progress or over production because having too much finished goods is not enough goods. Debtors’ management is to find the appropriate credit policy, and will have an impact on cash flows and cash conversion cycle will be used to offset the increase in revenue. If Microsoft forecasted revenues increased by 20 percent, it might happen because the increase of customers because of discounts. The last one is Short-term financing, it is to identify the appropriate source of financing, sometime it is good to have credit granted by the supplier, but it may also necessary to use bank loan, or to convert debtors to cash from selling the firms account receivable to get quick cash.

Effect on Revenue

An increase in revenue on a firm’s working capital can be a result of good management of a corporation’s strategic plan for measuring its assets and liabilities. Working capital represents a portion of a company’s investments that is used in the everyday business activities. For example managing the current assets represents about a 1/3 of the activities of the company and managing its liabilities represents ¼ of the companies’ activities. If Management adequately balances these two major components of the balance sheet this will balance the profits and reduce risks a company takes and all of this affects the

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