Guidance for topic 15 – working capital

@obuhmed – Do you work for an airline? or know much about airline operations?I think an airline may be rather challenging for this topic unless you have access to internal financial information. I base this statement on many factors that are specific to this industry. Unlike a manufacturing organisation there is no trade stock (apart from an insignificant amount of duty-free goods) and a significant amount of the business normally takes place in an international context with trade suppliers that range from oil companies to governments (landing fees and passenger taxes), and tie ups between other ‘partner’ airlines. Revenue receipts are also complex – individual passengers booking online pay upfront but the service is delivered later, there are intermediary online companies (Expedia) and again ‘partner’ revenue sharing and mutual booking arrangements. Bring in foreign exchange into this mix and I think trying to come up with an operating cycle without reliable information is at best going to be tenuous. On the positive side funding strategy analysis present some opportunities (but again many challenges): many airlines lease rather than buy aircraft, many no doubt go in for hedging currencies and oil prices on a major scale, probably have significant forward and future contracts and possibly use other derivative instruments. Need I go on….? If you have this sort of detailed knowledge about an airline you could do a brilliant RAP, if you don’t it will be a headache from start to finish.

General advice: if you want to do Topic 15 choose an uncomplicated sector (ideally a manufacturing or consumer retailing organisation rather than a utility or service one). Or alternatively if you want an airline as your company, choose a more amenable topic and if you have to rely on secondary data that would be 8, 18, 17 or 20.

This topic relates with overall analysis of working capital management of an organisation over a three years and how management of working capital impact on overall funding strategic of the organisation.

Working capital is the amount by which the value of a organisation’s current assets exceeds its current liabilities. Also called net working capital. Sometimes the term “working capital” is used as synonym for “current assets” but more frequently as “net working capital”, i.e. the amount of current assets that is in excess of current liabilities. Working capital is frequently used to measure a firm’s ability to meet current obligations. It measures how much in liquid assets a organisation has available to build its business. Working capital is a common measure of a organisation’s liquidity, efficiency, and overall health. Decisions relating to working capital and short term financing are referred to as working capital management. These involve managing the relationship between an entity’s short-term assets (inventories, accounts receivable, cash) and its short-term liabilities.

(source: http://www.readyratios.com)

Under this topic , first of all student must have basic knowledge of overall working management and he/she have excellent knowledge of overall management of the selected organisation. Based on this excellent knowledge, student will able to link working capital management (good or bad) with overall funding strategies of the organisation. Students need to calculate working capital ratios (investment turnover, debtors turnover, creditor turnover, etc.) and discuss about overall performance of the organisation under these ratios by considering various internal and external factors. Moreover, students need to analyze that what types of mitigation measures taken by the organisation to overcome working capital issues and he/she must link it properly with overall funding strategies of the organisation in effective manner as desire under this topic.

This topic is much focused on working capital aspect of an organisation so students need to very specific in his/her discussion in the project. Extra or irrelevant information will significantly impair overall grades of the project.

Key features / requirements:
Proper explanation of overall concept of working capital both in general (i.e. Litterateur Review) and specific to the selected organisation
Assessment of how selected organisation manage its working capital over a three year period and how ultimately it impact on overall funding strategy of the organisation.
Provide some quantitative and qualitative analysis to substantiate above mentioned aspects in proper manner.
Maintain proper balance in explanation / analysis of different aspects of management of an organisation’s working capital over a three year period and its impact on the organisation’s funding strategies.
*Feedback from project mentor is essential to get good grades in RAP.

Key Success Factors:
Proper application of all selected aims and objectives (that decided in inception of RAP) in appropriate sections of RAP.
Proper answering of all research questions (that decided in inception of RAP) in appropriate sections of RAP.
Usage of proper research methodology to achieve good result against all selected aims and objectives (that decided in inception of RAP).
Maintain proper sequence of all discussion in logical manner by keeping all requirements of the topic.
Logically conclude all performed work at the end of Research Report by keeping in consideration of all requirements of the topic.
*Feedback from project mentor is essential to get good grades in RAP.

Major benefits for choosing this topic:
Student will practically apply his/her bookish knowledge into real life.
Various techniques learned under this topic will substantially help student in his/her professional life.
Major possible limitations faced by student under this topic:
Students may not entertain well by the management of selected organisation in provision of required information due to various issues (e.g. confidentiality aspects, non availability of authorized person to disseminate information to student for research work, etc.)
Student may not find good stuff from internet or other sources (due to weak research approach) to bring ideas for improvement in the project.
Student may be confused due to variation in actual information (verbal or documented) provided from primary sources with the result that he/she actually derive from his/her research work as per requirement of the topic.
*Feedback from project mentor is essential to get good grades in RAP.

Suitable organisation under this topic:
The most suitable organisation under this topic is that for which student have access to management of the company and moreover management of the company is willingly provide all required information to student as required under the topic. Selection of most appropriate organisation is very essential as student must have better understanding of overall operations of the organisation and moreover he/she also have enough knowledge of the sector in which his/her selected organisation actually operates. Based on better knowledge of the organisation and respective sector , student will be able to interlink various aspect of overall operations of the selected organisation with all requirements of the topic that ultimately help him/her in getting good grades. In short student need to assess following aspects in selection of organisation for RAP.

Student’s own interest related to overall business of the organisation;
Accessibility of information from primary sources (extremely important in topic 15);
Accessibility of information from secondary sources;
Knowledge of overall operations of the organisation (extremely important in topic 15);
Knowledge of overall associated sector of the organisation;
Availability of time from concerned officials of selected organisation (extremely important in topic 15);
Basic idea of requirements of selected topic and their applications on proposed organisation in inception of RAP.
*Feedback from project mentor is essential to get good grades in RAP.

Suggested approach for this topic:
Under this topic, student must plan properly from inception so that he/she can complete all tasks effectively in proper manners. First of all, student must gain excellent understanding of major requirements of this topic and he/she need to critically assess all aspects of requirement by defining detailed strategy. Student need to assess that what process that he/she actually follow to meet all requirements that only possible through detailed planning in inception of RAP.

Student need to prepare overall content of RAP under topic 15 that describes logical sequence of all tasks that need to adhere by the student. This content will also help student to keep on right track from inception and at the same time student can also assess time factor against planned vs. actual tasks through considering his allocated time for complete preparation of RAP.

After finalization of overall content of RAP under topic 15, student need to start working logically from gathering of information as per requirement of topic. Student need to assess all gathered information very critically through consultation from mentor. Mentor feedback on key areas of RAP is very essential so student should share his/her thoughts with project mentor regularly to get efficient guidance in time accordingly.

In short, there is no 100% suggested approach for topic 15 as keeping broader level approach (described above) , detailed approach under topic 15 varies due to student’s perception that he conceived from requirements of the topic along with available information of selected organisation. Whatever, the approach you will follow , keep getting guidance from project mentor at every step so that you can meet all requirements of topic and get good grades.

*Feedback from project mentor is essential to get good grades in RAP.

Availability of Information:
Student have to complete his/her RAP based on provision of information directly from management of the organisation (i.e. primary sources of information) along with vast information available through different mediums (internet, newspaper, books, etc.) under secondary sources of information. Availability of information from primary sources under topic number 15 is very essential as this topic cannot complete at all without getting specific information of the selected organisation. Student need to ensure that he has access of vast information from management of the selected organisation and there is no confidentiality concerns by them as well.

In short, student need to assess very critically before opting this topic for RAP as all requirements of this topic only meet if student have enough information about selected organisation. If there is any doubt on provision of required information during perpetration of RAP then student should not select this topic for RAP as it impact on overall evaluation of information and overall grades of RAP.

*Feedback from project mentor is essential to get good grades in RAP.

@Swama – we had 2 forum topics for T15 which I have now merged into one. I suggest you read through all the queries and answers above as you will gain a better idea of what is involved.

Students tend to think this topic is almost identical to T8 . It most certainly is not and a sensible analysis of funding strategies is crucial. Choosing an appropriate company is also critical and complex organisations such as petroleum companies, airlines and energy / utility companies should be avoided.