Working Capital Management - Hewlett Packard

Essay by prncss722University, Bachelor'sA+, December 2007

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Working Capital Management � PAGE �4�


Working Capital Management Paper - Hewlett-Packard Company

Leah de Rosa

University of Phoenix

Working Capital Management Paper

Hewlett Packard's (HP) quarterly reports for July 2007 showed their retained earnings were $20,506 million therefore; 10% would be $2050.6 million (, 2007). The first step is to carefully look at the Statement of Cash Flows and verify the cash flow adequacy of this organization. Though this is not the only test of their adequacy for this loan, this is one step in realizing how much cash they have. Though one might believe the income statement would be the only information needed in this analysis, this provides information about company profits, and does not provide a clear indication of everything the company represents and sometimes more information is needed. Fortunately, HP has a large amount of cash listed in the third quarter of their Statement of Cash Flows from their operations activities, which is $6,006 million.

Even after looking at their investing and financing activities, which are $6250 million and $3706 million respectively, they were left with $12,450 million since they started with $16,400 million in the beginning of the third period (, 2007).

The Statement of Cash Flows represents both cash inflows and outflows, with operating activities, including cash receipts from selling goods, or providing services. There would be outflows including payments to purchase inventory, payment of wages, taxes, interest, utilities, rent, and similar expenses (Albrecht, Stice, Swain, 2005). Though this demonstrates HP can afford the loan, more examination might find indicators behind the numbers and therefore, more analysis should be done. One thing to consider is the liquidity which should determine if the company could pay back its debt. Their current ratio is 0.94, though this number is...