OBU RAP

Hi rena

This topic “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” relies upon choosing an organisation that is not too complex – and as you have noted elsewhere along with Topic 8 you are limited by specified industries. For P41 these are the same as those in P39 & 40 (see p.14-15 of the 2019/2020 Information Pack)

Most of the basic information should be in the financial statements but analyst reports can be useful to help appraise the figures objectively.

You will need to discuss the cash operating cycle as well as the consider liquidity and gearing ratios but importantly you will need to review the overall funding strategies and consider their impact on the bottom line and stakeholders.
– does the company keep issuing more shares? (as that dilutes the market value of those already in issue)
– while interest rates are low, taking on loans may be more beneficial to both the company and shareholders as interest is a tax expense and can be cheaper to arrange than rights issues
– it all comes down to balance as debt still has to be ‘manageable’ and while shareholders and the market expect dividends, the cash flow should still be adequate enough to cover these
Strategies are equally important to analyse as these underpin the company’s future plans and operational strategies.

There can be some complications if the company engages in hedging and employs specialist investment instruments so some understanding of these may be required (depending on the organisation).