Apex Printing functions in a competitive environment, namely commercial printing. Assessing and comparing the company’s performance against competitors is critical to future endeavors of expansion and issuance of equity shares. Determining financial metrics—which are important to shareholders and analysts—is not only essential from an external comparison standpoint, but also from an internal managerial awareness standpoint.
Primary Task Response: Respond to the following scenario with your thoughts, ideas, and comments. This will be the foundation for future discussions by your classmates. Be substantive and clear, and use examples to reinforce your ideas.
Mary sees you pass by her office the next day and waves you in to talk.
“Good morning,” she says. “I need you to write some content for a report I’m preparing. I could do it myself, but I can’t get to it before I have to leave town on business. This piece of the report is fairly straightforward. Given your expertise, I think you’ll do a good job with it.”
“Sure,” you say. “Whatever I can do to help.”
“Okay, good,” she says. “This report is for potential investors. The section I want you to write is about working capital. I’d like you to explain what working capital is and provide an equation that can be used to compute it. Then follow that up by computing the working capital for Apex, using the same balance sheets you have for the PowerPoint presentation you’re working on. Make sure to describe the trend.”
“I think I understand what you want,” you say. “It will be important to show whether the trend is improving, deteriorating, or moderating. Obviously, we want to demonstrate our need for external capital. However, another objective is to make the investor aware of the components of working capital, and how the components have changed over the last 2 years. Right?”
“Exactly,” she says. “Let me know if you have any questions.”
For this discussion, complete the following based on your conversation with Mary:
Explain what working capital is.
Provide an equation that can be used to compute it.
Follow that up by computing the working capital for Apex, using these balance sheets