Share
Explore BrainMass

Determination of a Company's Working Capital

During a board meeting, the CEO of TCB advised you that the lending bank is raising another issue about the audited financial statement presented. This time the loan officer is questioning the low level of the company's working capital. Please write a memo to the loan officer. Explain the various factors that can affect a company's working capital.

Solution Preview

During a board meeting, the CEO of TCB advised you that the lending bank is raising another issue about the audited financial statement presented. This time the loan officer is questioning the low level of the company's working capital. Please write a memo to the loan officer. Explain the various factors that can affect a company's working capital.

Dear Mr. Johnson,

I am writing you this memo to address your concern(s) regarding the current low level of TCB's working capital.
Cash, as you very well know, is the lifeblood of any company. If this lifeblood, more commonly known as working capital, is blocked or restricted in any way, so too is the company's ability to fund its operations, meet its capital requirements, reinvest and/or make payments to its creditors.
Working capital refers to "the cash a business requires for day-to-day operations, or more specifically, cash a business requires for financing the conversion of raw materials into finished goods, which the company sells for ...

Solution Summary

During a board meeting, the CEO of TCB advised you that the lending bank is raising another issue about the audited financial statement presented. This time the loan officer is questioning the low level of the company's working capital. Please write a memo to the loan officer. Explain the various factors that can affect a company's working capital.

$2.19