Question

Explain the importance of working capital for a company that will be selected in a portfolio? provide an example of a chosen company and calculate its working capital, show your procedure and your full information of the company. After looking at working capital, compare it to its cash-flow and analyze the shape of the company. Cash-flow statement found in 10K or 10Q

Answer 1

A Proper Managment of Working Capital is Essential to Company's fundamental financial health and operational success as a business. A Hallmark of good business is to maintain a solid balance between growth, Profitability and liquidity.

Working capital management is essentially an accounting strategy with a focus on maintenance of sufficient balance between a company's current assets and current liabilities. An Efficient working capital generally uses key ratios to identify the efficiency- current ratio, quick ratio, inventory turnover and collection ratio.

For the Analysis, I have selected Hindustan Unilever Limited(as Company with the financials of 2016-2017. While going through the Cash Flow Statement of HUL, we find that the surplus arising from operating activities is 4953 Crore, which shows the operating efficiency of the company in managing the funds. Further to comment on the efficiency of the company we will calculate some ratios:-