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topic 15 – An analysis and evaluation of the management of an organisation’s working capital over a three year period and its impact on the organisation’s funding stratergies.
Hi all, I would like to attempt this topic as I enjoyed F9, Also there is plenty of scope for analysis re ratios etc. I don’t want to follow the crowd by doing topic 8.
However im having difficulty initially defining my project objective. My initial thought were picking a uk department store and comparing to leader in the sector.
I was thinking of something like how the uk high street is struggling post credit crunch and the affect this has had on say length of operating cycle but i dont know if that is too vague or difficult to research and obtain a conclusion.
I would appreciate any thought , feedback on my idea ???
Many thanks
Rooster
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Dear Rooster
First of all topic 15 doesn’t require comparison with competitors.
major objectives include:*company’s working capital and assessing its effectiveness over three year period
*Identification of working capital strategy of the company and its impact on the company
*working capital changes and its impact on the sources of finance and company’s capital structure.
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2ndly
i would say… select a listed company as lots of information about company is available publicly.
way of thinking in project should be “what is the reason for specific changes in ratio in between two years.”\
This will help you find specific reason/justification for any deviation observed in any ratio.Ready to answer more Questions,
Regards
Waqas BukhariWhen dealing with Ratios like Current ratios and quick ratios in your evaluation of the effectiveness of the working capital management i think you have to compare with similar industry
First of all, be confident on your information availability for the topic on organisation and competitor also. Objective is based on what you have or you can have. If you have unlimited access to organisation data then your thought is right to analyse the affect of credit crunch but in my opinion credit crunch is a longer term issue and working capital is a short term so your first priority must be to analyze whether company is overtrading or over capatalized? or something very specific to its weakness or strength for example analyzing its debtors management ability or creditors or inventory management. You can also have a objective that you want to know that whether it is following agressive, conservative or neutral policy of working capital management? You can even write you want to know where company stands in comparision to a competitor.
All is based on what information you have. Please post any questions if you have.
Thank You.
I can’t think of any business models for wc management and its impact on funding strategy.
I have calculated all ratios relating to wc of the chosen company and the industry.
I have written the report on the area related to the wc management.But I’m stuck on the funding strategy. I don’t have information to calculate cost of capital, plus it will be financial method of evaluation. Are there any non-financial business models I can use here?
Will it be alright if I do a PEST / SWOT analysis and try to link it to funding strategy? I am doubtful about this because these models are used to access market environment.
The use of models/theories are required for only some topics?I don’t want to start on a new topic at this time. Please help.
there should be atleast one business model.. BCG, five forces, SWOT
I am also not sure which business model should be best
With this topic it is possibly more a case in Part 2 of considering various aspects and theories that form part of Working Capital as it would be hard to find an actual ‘model’ that covers absolutely everything. For example you could consider Just in Time and economic order quantities (or any other inventory techniques) as part of the Operating cycle and then evaluate their appropriateness in Part 3 in the context of your particular case study. Using a SWOT /PEST is always a good idea, particularly if you can tie the SWOT to the funding strategies as proposed (might be a bit harder to link the PEST – but not impossible – you could try – government incentives to help business borrowing, interest rates, inflation, – that sore of thing perhaps). You will presumably be doing some form of an application of financial modeling in connection with the Operating Cycle in Part 3? If you do all of this adequately you should have covered the assessment criteria 1 & 2. 🙂
Hi, I want to do theme 15 (an analysis and evaluation of the management of an organisation’s working capital over a three year period and its impact on the organisation’s funding strategies) for my RAP.
When I choose a company and a similar one for comparison, do I need to ask them permission?
And how do I start please? Do I need to read journal articles if there are on this topic first? What should be my first step please?
Thank you for your advices.
@angele1 – if you intend to use confidential information that is not in the public domain then you would need the company’s permission. (Normally you will only have access to such info if you either are already working for the organisation or you audit it. In either case you are contractually bound to seek permission to disclose it to a 3rd party I.e. OBU). Otherwise you use the information that is publicly available – usually the annual report and any other info issued by the company.
At this stage you need to read up on appropriate aspects of working capital and think about possible models you can use – articles on the internet, business journals – anything relevant that will give you a good overview. You should find that well written articles (particularly academic papers – go on Google scholar) tend to have a bibliography and that leads to further material. Jot down a few ideas or anything that interests you. As submission is months away you have the luxury of being able to reflect for a while and assimilate the information. You should then be in a position to be able to draft a few aims and objectives of your work e.g. what is the overarching purpose of your report in relation to the topic? what do you intend to research? why? and how? These will form the basis of the first part of your RAP. You should also familiarise yourself with the OBU Information Pack as that gives more guidance. You will also need to consider how you will go about choosing a relevant company – a retail or manufacturing organisation is more appropriate. Avoid complex industries e.g. petroleum and mining companies and large service industries as their operations regarding working capital are extremely complicated (and not covered by the type of simplistic explanations you find in study texts and text books examples)
Hi, thank you so much for answering my questions so clearly 🙂
PS: Oops, sorry I posted my question in this topic
@angele1 – no probs as you can see it I’ve now moved it to the correct forum so other students thinking of doing Topic 15 can share it 😀
Hi again,
Please could you tell me if we can use some regression analysis for the topic 15?
I was thinking of the different components of working capital as the explanatory variables (and some other external variables like interest rate also) and ‘funding strategy’ as dependant variable (I don’t know yet which data to use for this).
Is it a good idea to use some regression analysis (though the topic asks for 3 years only)?
Thank you loads.
@angele1 That sounds like a very good idea as it will demonstrate your ability to analyse and provide a basis for some objective evaluation.
I found a couple of articles that show you how you can use regression analysis in a working capital situation.
https://www.rivier.edu/journal/ROAJ-Fall-2007/J119-Ganesan.pdf
These are intended just to give you an idea; they may be rather advanced in places but don’t worry, you will only have to demonstrate the fundamentals in your RAP. However the articles will probably help you to explain how and why you are taking the relevant approach as it is important to demonstrate that you understand the relevance and importance of the techniques and set out the stages in your quantitative analysis in a clear manner so that it can be followed (the Understanding and Application parts of the Assessment Criteria).
You will probably find more articles (should you need them) on Google Scholar . Just remember two things: 1. to cite them in your references if you use them and 2. the best ones in terms of reliability will be attached to more prominent universities and colleges.
Hi Trephena,
Again thank you so much for your expert advice. As always you are very clear, you have answered my questions and even given me clues and advice about what to do next.
And thank you for your time and for the journal articles in the link 🙂 I will bear in mind the advice you gave on the quality of journal articles and their referencing.
🙂
@angele1 A pleasure! Hope all goes well with your RAP.
You are obviously putting a lot of thought into your work and allowing yourself a good window of time to complete it, so hopefully your efforts will be well rewarded 😀
One final thing I’ve just thought of – some markers are neurotic about models so just include a SWOT /PESTLE to keep them happy! 🙂
Hi Trephena,
He he 🙂 yes you’re right, I will also include a SWOT / PESTLE. I don’t know much about these models now. But by december I should know as I will be sitting for P3 this december.
Thank you so much for your kind advice 🙂
You cannot replace funding strategies with SWOT, PEST or PESTEL.
Best project on Topic 15 must include:
• Comparative financial statements
• Ratio Analysis
• Trend Analysis
• Graphical Representations
• Funding Strategies of Working capitalSo, you need discuss it funding strategy. Please let me know which calculation you are doing for funding part??
Thank You.
@Hammas Ahmed Qureshi If you read my full answers to angele1 you would see that I am NOT suggesting that funding strategies be replaced with a SWOT or PESTLE, the suggestion was to include one of these as AN ADDITION.
On the basis of actual student feedback I have seen (and I have 10 years RAP experience and probably seen several thousand RAPs), some markers actually expect to see one included (and I even know of one student failed on the Budgeting topic and told to include one) so this was one of my ‘handy hints’ to avoid such a thing happening to this student. 🙂
I started this topic last year and stop to go back to writing my exam now am considering going back to write this research for November submmittion do you think i have enough time and will you consider this topic as the best to get more marks
@dannito1 So you have asked for my honest opinion? Well here goes then. No I do not think this is the easiest topic unless you have both a good and practical knowledge of cash management in which case it probably is.
If easiness equates to popularity then Topic 8 must be viewed as such by most students. It probably has about an average pass rate of about 52-54%. If students realised what evaluation was all about it would be far higher as that is what T8 mostly fails on + information gathering.
In my opinion T17 is the one to go for if you follow the guidance I have outlined on the T17 forum. And it generally gets higher grades
Yes you have time to submit a decent project if you start right now.
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