Working Capital Case Study
Obtain at least two years of financial information pertaining to the Mcdonald's Corporation from its most recent annual report (10-K). Then, use the information contained in the annual report to calculate the following:
1) Inventory period
2) Accounts receivables period
3) Accounts payable period
4) Cash conversion cycle
5) Operating cycle
Be sure to show your calculations in your analysis.
b. Based on your calculations and other research, prepare a 700-1,050-word analysis of your selected company's working capital in which you address the following items:
1) Make recommendations for financial decisions that the organization could pursue based on its working capital situation.
2) Make recommendations for ways that the organization could improve its operating cycle.
3) Describe the possible financial impact of these recommendations on the organization's overall working capital situation.
4) Prepare a cash flow timeline for your company, similar to Figure 13.1 from chapter 13 of the text, Principles of Managerial Finance, Brief Fourth Edition, by Gitman.
Financial data found here
Answers to 1-5 are attached in the excel sheet.
For b. 1) The working capital of the company as on 12/2008 is 642, 300,000 against 1,065,300,000 as on 12/2007. So basically the working capital of the company has decreased in 2008 compared to 2007. If we look at the reasons for this there has been a decrease in cash holding,account receivables, account payables, and accrued liabilities. Even though we do not have the industry standards, it appears to me that the working capital situation is reasonable and company needs to deploy its current resources in a better investment situation. It has to focus on profitability.The following are my recommendations.
a. The company should purchase some fixed assets. From the data, it appears that the company has shifted large portion of its fixed assets to current assets. The company has to quickly make some fixed assets purchase as in the long term there will be good appreciations. The cash held does not yield any return.
b. The company should make some investments in marketable securities as they would yield some return. It has huge cash which does not yield any return. Even though ...
Working capital case study for the McDonald's Corporation is given. The inventory periods, accounts receivable periods.