Microsoft Corporation’s Working Capital Management

Microsoft Corporation’s Working Capital Management
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Microsoft Corporation’s Working Capital Management
Financial Statements
The Various Financial Statements Needed to Calculate a Business’s Working Capital
Balance sheets are financial statements containing the particulars of organizations' assets and liabilities at certain periods. Haralayya (2021) asserts that "the financial condition of the business concern can be found out by preparing a comparative balance sheet" (p.187). Managers need a corporation's balance sheet to help them calculate its working capital by subtracting current liabilities from the current assets stated in the statement. For example, companies X and Y's total current assets for the year ending 31st December 2020 were $160,000,000,000 and $180,000,000,000, respectively. The current liabilities for X and Y were $90,000,000,000 and $80,000,000,000, respectively. Therefore, the firms' working capitals were as follows. Company’s X working capital = $160,000,000,000 - $90,000,000,000 = $70,000,000,000. Company’s X working capital = $180,000,000,000 - $80,000,000,000 = $100,000,000,000. Both corporations had positive working capital because they had enough current assets to cover their short-term monetary obligations.
Working Capital’s Role
How Businesses that Manage their Working Capital Well Stay Healthy
Healthy businesses manage their working capital well by avoiding stockpiling, decreasing inventories that move slowly, and increasing stock turnover cycles. According to Boisjoly et al. (2020, p. 1), companies “have discovered that there are important cash flow streams available to them if they aggressively manage their working capital accounts.” Therefore, firms with proper working capital management have adequate cash to invest in other profitable projects. Inventory is an asset in the working capital formula. However, keeping less stock means that a business has more freed-up cash flow, hence will stay healthy.
Working Capital Interpretation
The Business’s Current Financial Liquidity Position
Microsoft Corporation’s working capital for the quarters ending 30th June 2022 and 2021 are calculated using the following formula. Working capital = total current assets - total current liabilities. The Corporation’s total current assets for the quarters ending 30th June 2022, and 2021 were $169,684,000,000 and $184,406,000,000, respectively. The current liabilities for 2022 and 2021 were $95,082,000,000 and $88,657,000...