Business Finance - Management Week 9 Assignment- Managerial Finance

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Part 1: Short-Term Working Capital Considerations

Lakenya Campbell

Walden University

MBAX 6070

Dr. Ed

January 18th, 2026

Part 1: Short-Term Working Capital Considerations

Gross working capital is a reflection of total current assets, whereas net working capital is the difference between current assets and current liabilities. Net operating working capital also focuses on operating accounts as opposed to financing aspects; in other words, inventory, accounts receivable, and accounts payable are more directly related to performance. The cash conversion cycle records when managers increase liquidity by decreasing the amount of time that cash is held up in the operations (Brigham & Houston, 2022). As such, the operating working capital management can enable the firm to minimize the operating cycle as well as curb dependency on the external short-term funding.

The proposed venture by the owner is the establishment of a subscription-based corporate replenishment program of high-margin consumable inputs, which is supposed to require an extra $50,000 in monthly purchases of inventory in 12 months. Some of the ways in which the firm can fund its trade are trade credit, revolving credit, short-term bank loans, inventory financing, or receivables-based financing, and each will vary in flexibility, cost, and monitoring. Trade credit is supportive of growth without paperwork, but suppliers tend to pass the price and restrictive terms. Bank line of credit will come with flexibility and predictability of access, though there may be enhanced limits through covenants and floating rates (Brigham & Houston, 2022). I will suggest that negotiating longer terms with suppliers and obtaining a revolving line of credit of its own size based on seasonal highs is a balance between cost, control, and reliability.

Based on the provided operating periods, the cash conversion cycle is 64-28-41= 51 days, and the firm still should strive to decrease inventory days and the collection days (Hamad, 2024). Accounts receivable investment is 197,782.41 with a 28-day average collection period and credit sales amounting to 2,578,235 annually. On the basis of the cost of goods sold at 75 percent of the data at 64 64-day conversion period, the estimated inventory is 339,055.56, and the inventory turnover is 7.60 times per year. Competitor A has a cash conversion cycle of 112 days, and Competitor B has 104 days; therefore, the company has a significant efficiency advantage.

The sales growth between 5,000,000 and 6,000,000 suggests an additional amount of funds needed of 446,000 according to the traditional AFN framework, and thus the management ought to decrease AFN by enhancing profit margin, retention growth, collections, inventory, and enhancing spontaneous financing by means of payables discipline (Cundiff, 2019). In the case of the Israel opportunity, the implied cross rate is 109 divided by 3.58, or 30.45 yen per shekel, and thus routing over yen will only give a better result when there is a different transaction cost or quoted spread across the markets. The company must select the cheapest route once bank spreads and bank fees are confirmed, and it must look at hedging in case the investment horizon is not known.

References

Brigham, E. F., & Houston, J. F. (2022). Fundamentals of financial management (16th ed.). Cengage Learning.

Cundiff, K. (2019). Additional funds needed (AFN) [Video]. YouTube. https://www.youtube.com/watch?v=kwM1Y2uHgeI

Hamad, S. (2024). The Average Collection Period, The Inventory Turnover Period, and The Average Inventory Period: Statistical Relations and Interpretation.  ESI Preprints (European Scientific Journal, ESJ),  35, 62–62. https://esipreprints.org/index.php/esipreprints/article/view/1374

Week 9 Assignment

Managerial Finance

Capital Budget Decision Making for an Organization- Part 2

Note: In Week 8, you submitted Part 1 of the Module 3 Assignment. You will complete and submit Part 2 this week. Next week, you will complete and submit Part 3 and the executive summary.

As a reminder, you will continue to play the role of a consultant who has been hired by a mid-sized company that recently became public to provide some recommendations related to their short-term and long-term financial needs. Your first project is to analyze the short- and long-term capital budget needs of the company. You will prepare and submit a 3- to 5-page report, including an executive summary in which you synthesize your recommendations for the following fiscal year, along with the Excel spreadsheet provided with your calculations. Explain your findings and your recommendations.

For each of the items in your report, you will complete the calculations in the Module 3 Assignment Part 1 Template and will then use that financial information to develop your report to the owner using the Module 3 Assignment Part 2 Template. In your report, be sure to include relevant citations from the Learning Resources, the Walden Library, and/or other appropriate academic sources to support your work.

To prepare for this Assignment:

· Return to the Module 3 Assignment Part 1 Template to continue completing the calculations.

· Return to your Module 3 Assignment Part 2 Template to complete Part 2 of your report.  Note: Be sure to keep a copy of your completed Assignment this week, as you will be adding to the same file for your Week 10 Assignment.

Submit your synthesis of financial data related to long-term financing needs for an organization, to include the following:

Part 2: Long-Term Working Capital Considerations: Time Value of Money and Bonds (1–2 pages, plus calculations in Excel)

· Future Value: If the company deposits $2 million in a bank account that pays 6% interest annually, how much will it be in the account after 5 years?

· Present Value: What is the present value of a security that will pay $29,000 in 20 years if securities of equal risk pay 5% annually?

· Required Interest Rates: The company owner has said she will retire in 19 years. She currently has $350,000 saved and thinks she will need $800,000 for retirement. What annual interest rate must she earn to reach that goal, assuming she does not save any additional funds?

· Future Value of Annuity: Find the future values of these ordinary annuities. Compounding occurs once a year.

· $500 per year for 8 years at 14%

· $250 per year for 4 years at 7%

· $700 per year for 4 years at 0%

· Present Value of an Annuity: Find the present values of these ordinary annuities. Discounting occurs once a year.

· $600 per year for 12 years at 8%

· $300 per year for 6 years at 4%

· $500 per year for 6 years at 0%

· Bond Valuation: The company has two bonds in their investment portfolio, Bond C and Bond Z. Each bond matures in 4 years, has a face value of $1,000, and has a yield to maturity of 8.2%. Bond C pays an 11.5% annual coupon, while Bond Z is a zero-coupon bond. Assuming that the yield to maturity of each bond remains at 8.2% over the next 4 years, calculate the price of the bonds at each of the following years to maturity. Explain any observed differences from the pricing calculations of the two bonds.

Years to Maturity	Price of Bond C	Price of Bond Z
4
3
2
1
0

· Yield to Maturity and Yield to Call: The owner is interested in investing some retained earnings in corporate bonds. She is considering the following:

· Bond A has a 7% annual coupon, matures in 12 years, and has $1,000 face value.

· Bond B has a 9% annual coupon, matures in 12 years, and has a $1,000 face value.

· Bond C has an 11% annual coupon, matures in 12 years, and has $1,000 face value.

Each bond has a yield to maturity of 9%.

a. Before calculating the prices of the bonds, identify whether each bond is trading at a premium, at a discount, or at par. b. Calculate the price of each of the three bonds. c. Calculate the current yield for each of the three bonds.

Week 9 Learning Resources

Managerial Finance

Time Value of Money

If you had $100 today, would it be worth the same as $100 a year from now or more? The answer is that $100 is worth more today because of the concept of time value of money (TVM), which can also be called present discounted value. One year may not seem like much, but consider it this way: Would $5,000 be worth more today or in 1950, when the average yearly income was a few thousand dollars? Money today can be used to invest in a business, and it can be invested to generate interest. Or, it could be tucked under a mattress and slowly have its value deteriorate due to inflation. These are the principles that are relevant when discussing the time value of money and what to do with your or an organization’s cash. Using these resources, you will examine the concept of time value of money.

· Brigham E. F., & Houston, J. F. (2022). Time value of money. In  Fundamentals of financial management (16th ed., pp. 151–185). Cengage Learning.

· The Finance Storyteller. (2018, November 29).  Time value of money explained  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=gkp-7yhfreg

· ProfCoram. (2011, August 16).  Calculating PV (present value) and PMT (payment) time value of money problems using Excel  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=rpUD7nVKjGI

· ProfCoram. (2011, August 16).  Calculating FV (future value) time value of money problems using Excel  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=AuJvHoypfQU

· ProfCoram. (2011, August 16).  Calculating RATE time value of money problems using Excel  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=PUQgILo9C3s

· ProfCoram. (2011, August 16).  Calculating PMT (payments) time value of money problems using Excel  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=HxUYo-nsyyE

· Walden University, LLC. (2021).  Present value of an investment [Video]. Walden University Canvas. https://waldenu.instructure.com

· Walden University, LLC. (2021).  Future value of an investment [Video]. Walden University Canvas. https://waldenu.instructure.com

· Walden University, LLC. (2021).  Future value of an annuity [Video]. Walden University Canvas. https://waldenu.instructure.com

Bond Valuation

While performing a bond valuation, you will aim to determine what the theoretical fair value is for a bond, including making the calculation the present value of its future interest payments, which is also called its cash flow. You will also aim to calculate its value upon maturity, which is also called its face value or par value. Through these resources, you will explore the concept of bond valuation.

· Brigham E. F., & Houston, J. F. (2022). Bonds and their valuation. In  Fundamentals of financial management (16th ed., pp. 231–265). Cengage Learning.

· Brigham E. F., & Houston, J. F. (2022). Interest rates. In  Fundamentals of financial management (16th ed., pp. 196–224). Cengage Learning.

· Marketplace APM. (2011, September 10).  What is a yield curve?  Links to an external site.  [Video]. YouTube. https://www.youtube.com/watch?v=FfZNTsoNjGg

· Investopedia. (n.d.).  Some advantages of bonds  Links to an external site. . http://www.investopedia.com/articles/00/111500.asp

· EasyCalculation.com. (n.d.).  Bond price calculator  Links to an external site. . https://www.easycalculation.com/finance/bond-price-calculator.php

· Kenny, T. (2020, February 11).  Evaluating a bond with yield to call and yield to worst  Links to an external site. . https://www.thebalance.com/the-difference-between-yield-to-call-and-yield-to-worst-417079

· MoneyChimp.com. (n.d.).  Bond yield calculator  Links to an external site. . http://www.moneychimp.com/calculator/bond_yield_calculator.htm

· Walden University, LLC. (2021).  Bond valuation [Video]. Walden University Canvas. https://waldenu.instructure.com

· Walden University, LLC. (2021).  Yield to maturity and yield to call [Video]. Walden University Canvas. https://waldenu.instructure.com