Working Capital Management

Working capital management is critical to an organization’s ability to meet its short-term obligations. When
proposing new projects or investment ideas for corporations, it is critical to consider working capital red flags
such as excess credit use by the business or a low cash balance. Managing such issues early on can help
corporations acquire a competitive advantage in the marketplace.
Using the business you selected for Project Two, complete the calculations for determining working capital, and
describe their relevance in assessing financial health.
Specifically, you must address the following rubric criteria:
Financial Statement(s): Explain the various financial statement(s) needed to calculate a business’s working
capital and how each financial statement is used. Provide examples to support your claims.
Working Capital’s Role: Discuss how effective working capital management supports a healthy business.
Working Capital Interpretation: Use the appropriate formula to calculate working capital, then discuss the
business’s current financial liquidity position.
For example, does the business have sufficient working capital on hand to address bills to suppliers? Will there
be potential cash inflow at the end of the year?
Working Capital Management Direction: Discuss the current direction of the business regarding working capital
Keep in mind that financial statements reflect a specific moment or period of time and the value of the
business’s working capital during that period. To get a better understanding of the direction in which a business
is going, use the business’s balance sheets from Mergent Online to compare the business’s value today
against its value from one year ago.

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