Discuss relevant working capital management theories


Assignment Instructions:

You are required to obtain the latest annual report of a public limited company. This may be a company you have worked for previously or would like to work for when you finish your MBA. You want to find out as much information about the financial management decision making style of the company from these reports.

You can obtain annual reports by going to the website of the company and looking under 'investor relations'.

You only need to print off the three main accounts contained within the annual report. These accounts are The Income Statement, Statement of Financial Position (or Balance Sheet) and Statement of Cash Flow. Using the information contained within these accounts for the last two years, and with reference to relevant theories studied within the module you are required to do the following:

1. Discuss the different long-term sources of finance available to companies and theories that discuss their risk/return characteristics and optimum capital structure. With reference to the accounts then discuss the long term capital structure of the chosen company and what this may indicate about the company's attitude to risk. You may need to refer to the specific note in the notes to the accounts to get detailed information on this. Part of your answer to this question should include calculation of a suitable gearing ratio.

2. Discuss relevant working capital management theories. Then calculate suitable working capital ratios and discuss how efficiently the company is managing its short-term sources of finance.

3. Discuss the range of dividend policies available to companies, why certain companies may choose certain policies and what sort of dividend policy the directors of the company seem to be following and possible reasons for this.

4. Assess the profitability and risk of the company and how attractive it appears to be to potential investors, in doing so make use of market structure analysis internal to the industry. Your answer should include some evaluation of the type of external economic environment of the company and the business models used. Suggest how Minsky analysis can be applied to the company and market you have chosen.

You may want to look at information contained on the FAME/OSIRIS database for longer term information. Please note the ratios calculated on FAME/OSIRIS can often be different to those you will be calculating from the accounts for a number of reasons.

Note - The word limit for this coursework is 2,500. Word count includes everything in the main body of the text (including headings, tables, citations, quotes, lists, etc.).

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Financial Accounting: Discuss relevant working capital management theories
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