Essay on Working Capital Strategies for Microsoft

1213 Words Mar 17th, 2012 5 Pages
Working Capital Strategies

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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
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Example of the Current Liabilities is; accounts payable, accruals, and Notes Payable these should also be managed adequately to increase revenue. If a firm manages its cash or investments the profitability of the company will be balanced because the relationship between what is costs to operate the business and what it owns equates to revenue and how productive a company is. If there is more debt ratio for a company than assets the company will be at risk or closer to insolvency which is to be unable to meet its debt obligations. Risk comes with a price, a corporation measures risk as well to see the result of trade-off for a company the higher a risk the higher the expected return because of the risk it takes. A firm increases its profits by increasing their revenues and decreasing costs. There are some strategies that a company can use to increase revenue and working capital. One of the strategies that management can use is to manage their cash conversion cycle. This cycle impacts how long a company will be able to convert their account receivable and inventory into cash. The sooner a company can convert their accounts receivables and inventory into cash the more liquidity a company has thus more Revenue. Just as cash conversion collecting receivables from their sales as quickly as possible by shortening their collections period the more cash a company will have this increases revenue. On the other hand being able to

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