Working Capital Strategies Paper

Working Capital Strategies Paper - Working Capital...

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Working Capital Strategies 1 Working Capital Strategies Paper University Of Phoenix Finance 419 August 25, 2008 Introduction
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Working Capital Strategies 2 Wal-Mart was established in 1962 and expanded to 24 stores only five years later. By 1997 Wal-Mart was the largest private employer in the United States and in 2006, the Jobs and Opportunity Zone program was introduced by Wal-Mart. “Through the program, 10 designated Wal-Mart stores will work with surrounding local businesses, suppliers and community organizations to direct grant money, and spur job creation and economic development in the surrounding neighborhood” (WalMartstores.com, 2001). Wal-Mart’s constant vigilance regarding current assets and liability accounts has affected the cash management strategies and has lead to the continued success of the firm. The company must be aware of the implications of, and make adjustments to projections based on the impact an increase in revenue has on the working capital policy of the firm. Current Assets and Liability Accounts When managers discuss the current assets and liability of the company, they will look at the previous year’s balance sheet, statements of cash flow, income statement and management’s comments over the years. Managers will look at the balance sheet to make sure the company has enough current assets to cover the liabilities of the company. Once they understand that report, then the managers will see how the company’s cash flow is working. Wal-Mart as the leading retailer in the world is always improving it’s cash flow to debt ratio to maintain that number one slot. The senior managers of Wal- Mart will use GAAP measures to compare the ratio of cash flow from operations of continuing operations for the current period to average total debt (which excludes any effect of operating leases or capitalized interest), for the twelve months ended July 31, 2008 with a 55% and 2007 with a 47%, respectively (Wal-Mart, Cash Flow, 2008). The
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Working Capital Strategies 3 senior managers of Wal-Mart stated, “Our free cash flow increased from fiscal 2007 primarily due to the reduction in our capital expenditures primarily associated with our planned slowing of store expansion in the United States. Important financial measure for
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This note was uploaded on 08/17/2011 for the course BUS 200 taught by Professor Torres during the Spring '11 term at University of Phoenix.

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Working Capital Strategies Paper - Working Capital...

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