1. Explain if Apple Inc has too much, too little, or just the right amount of working capital? How..


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1. Explain if Apple Inc has too much, too little, or just the right amount of working capital? How.. 1 answer below » 1. Explain if Apple Inc has too much, too little, or just the right amount of working capital? How did you make this determination? 2. Does Apple Inc need to shorten its cash conversion cycle and how do you know that (calculate the cash conversion cycle using the attached model)? 3. What working capital financing strategy is used by Apple Inc? What actual financial data support the conclusion? Make sure that you complete the analysis using the attached Excel model that examines a firm’s working capital financing strategy. 2. EXAMINING A FIRM’S WORKING CAPITAL FINANCING STRATEGY Working View complete question » 1. Explain if Apple Inc has too much, too little, or just the right amount of working capital? How did you make this determination? 2. Does Apple Inc need to shorten its cash conversion cycle and how do you know that (calculate the cash conversion cycle using the attached model)? 3. What working capital financing strategy is used by Apple Inc? What actual financial data support the conclusion? Make sure that you complete the analysis using the attached Excel model that examines a firm’s working capital financing strategy. 2. EXAMINING A FIRM’S WORKING CAPITAL FINANCING STRATEGY Working Capital Cash Marketable Securities Accounts Recevable Inventories Other Current Assets Other Current Assets Total Working Capital Short-term Financing $16,182.0 Trade Credit (Accounts Payable) Notes Payable $4,369.0 Short-term debt $6,405.0 Other short-term financing $3,093.0 $470.0 $12,576.0 $1,075.0 $4,021.0 $0.0 $21,235.0 $26,956.0 Total Short Term Financing Long-term Assets Fixed Assets $88,642.0 Other Long-term Assets $115,345.0 Total Long-term Assets $203,987.0 Long-term Financing $47,618.0 Long-term Debt $117,491.0 Other Long-term Financing $165,109.0 Total Long-term Financing. Total Assets $225,222.0 $192,065.0 Total Liabilities $33,157.0 Shareholders’ Equity $225,222.0 Total Liabilities & Shareholders’ Equity Company Verizon Source of Data http://finance.yahoo.com/q/bs?s=VZ+Balance+Sheet&annual Refer to Page 636 of Brigham & Ehrhardt, Financial Management, to see how to examine the strategy. Document Preview: 67.510000000000005
47.65
50.44
30.58

2008

3176.6
47.650160549014664

439
50.442296795315748

414.7
30.575615437889571

266.10000000000002
67.516841906440845

2007

2916.2
57.136856182703525

430.2
53.845072354433853

456.5
30.452129483574517

243.3
80.529799053562868

2006

2716.4
50.93929465469003

405.7
54.513510528640843

379.1
30.152407598291855

224.4
75.300397585039008

An Increasingly Popular Method for Evaluating a Firm’s Effective Management of its Working Capital
Takes the Approach that the Firm’s Objective Should Be to Minimize Working Capital
Subject to the Constraint That it has Sufficient Working Capital to Support the Firm’s Operations.
Minimizing Working Capital is Accomplished by Speeding Up the Collection of Cash from Sales,
Increasing Inventory Turns, and Slowing Down the Disbursement of Cash.
The Cash Conversion Cycle Incorporates All of These Factors in a Single Measure.
Days of
Sales
Outstanding
+
Sales in
Inventory

Payables
Cash Conversion Cycle =
Accounts
(Sales / 365)
Accounts Payable
Receivable
Total Sales
Total Inventory
Accounts Receivable
Inventories

=
CALCULATE CCC IF DSO, DSI & DPO ARE KNOWN
CCC =
CALCULATE CCC USING FINANCIAL STATEMENT DATA
Most Recent Year
CURRENT YEAR
LAST YEAR
TWO YEARS AGO
CCC
Days Sales Outstanding
Days of Sales in Inventory
Days of Payables Outstanding
Cash Conversion Cycle (Days)
ARE KNOWN
The first model below calculates the Cash Conversion Cycle if the Days of Sales Outstanding,
CALCULATE CASH CONVERSION CYCLE IF DAYS OF SALES OUTSTANDING,
DAYS OF SALES IN INVENTORY, AND DAYS OF PAYABLES OUTSTANDING
Days of Sales in Inventory, and Days of Payables are known. Insert those indicators in
the yellow-coded cells and…

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