Prompt Using the business you selected for Project Two, complete the calculations for determining working capital, and describe their relevance in assessing financial health.
• Financial Statement(s): Explain the various financial statement(s) needed to calculate a business’s working capital and how each financial statement is used. Provide examples to support your claims.
• Working Capital’s Role: Discuss how effective working capital management supports a healthy business.
• Working Capital Interpretation: Use the appropriate formula to calculate working capital, then discuss the business’s current financial liquidity position. o For example, does the business have sufficient working capital on hand to address bills to suppliers? Will there be potential cash inflow at the end of the year?
• Working Capital Management Direction: Discuss the current direction of the business regarding working capital management. o Keep in mind that financial statements reflect a specific moment or period of time and the value of the business’s working capital during that period. To get a better understanding of the direction in which a business is going, use the business’s balance sheets from Mergent Online to compare the business’s value today against its value from one year ago.
