Working Capital - Managerial Finance

May 12th, 2015
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Strayer University
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Notes: Title the work under 3 headings: 1 a. Explain what working capital is b. Provide an equation that can be used to compute it. 2. Compute the working capital for Apix. 3. Analyze the working capital of Apix. Primary Task: Write 400–600 words that respond to the following questions with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas. Apix Printing, Inc. functions in a competitive environment, namely commercial printing. Assessing and comparing the company's performance against competitors is critical to future endeavors of expansion and issuance of equity shares. Discuss the following: Define working capital, and explain why it is important. Why would a company want to compute working capital? Using these balance sheets, ( Apex_Printing_Financial_Statements (1).pdf) compute working capital. Provide your analysis regarding working capital. Prima

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Working Capital Analysis of Apix PrintingWorking capital defines a company's short term financial health and it indicates that whether company will be able to meet its short term liabilities or not. Working capital is calculated by subtracting current liabilities from current assets. If answer is favorable, it indicates that company will be able to pay its short term debts, and if answer is not favorable it means company might not be able to pay off short term debts and worst scenario can be bankruptcy. Formula:Working Capital = Current Assets - Current LiabilitiesWorking Capital ratio = Current assets/current liabilities Working ratio is also a good way to analyze a company's financial health. Current assets are divided by current liabilities to calculate working capital ratio. If answer is less than one, it means ratio is not favorable and company might not be able to meet its short term debts. On the other hand if answer is more than 2, it is also not a very good sign, it means company is holding cash back and not investing in inventories and other needs of business, in short funds are underutilized. According to experts the working capital ratio between 1.2 and 2.0 is good and this is the ratio companies should be looking forward to maintain. Companies should keep an eye on the working capital; it gives overall view of cash flow. It can also help companies in developing credit limits debtors; if cash is stuck with debtors, it means company cannot u

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