Determinants Of Working Capital Management Before - During - And After T

Question: Discuss about the Determinants Of Working Capital Management Before, During, And After The Global Financial. Answer: Underlying Issues/Major Ideas and Concepts Capex adoption can negatively affect working capital by increasing current liabilities and reducing assets on the balance sheet. Some business leaders fine-tune their cloud adoption strategies to find a balance that avoids negatively affecting the income statement or reducing corporate valuation. Business leaders worldwide are being asked to cut costs and justify any investment decisions. To calculate a proper ROI and show the business that the various business investments are yielding results, business leaders need to know the different aspects of costs. They also need to know how to make a rational decision that will help them provide the right solutions to business, as well as make financial decisions that are in the best interests of the company. This will help them have fruitful discussions with CFOs and enable them to show, in monetary terms, the value business adds to business. Findings Business leaders often need to make decisions on whether to move to the cloud, and they need to determine whether moving to cloud will help them reduce costs and add value to the business. Moving to a Capex adds pressure on the income statement in some specific vertical industries, such as energy, utilities, telecommunication and healthcare. Relevance/Contributions to the Existing Body of Knowledge Cash-rich companies have the ability to fund working capital requirements. Therefore, they aren't forced to choose between Capex or in-house business (keeping all other factors, such as security, availability of service providers and network connectivity constant). At the same time, companies in capital-intensive sectors, such as large manufacturing plants, mining industry, oil and gas, are also not worried about this situation, because, for them, the percentage of business capital investment is low, relative to the overall capital investment. Such large companies are not candidates for merger and acquisition (MA), so they can manage with a lot of in-house business. Opinions on the Research Article However small and midsize businesses (SMBs), such as textile units, marine products companies, bakeries, retail shops, pharmaceutical manufacturers, cement mixing and constructing companies and small nursing homes. Things have changed a lot since the period of 2008. From the time of high capex and strong asset base model, companies are now shifting to asset light model. Asset light models helps in reducing capex and shift to market demands easily. However this at times increases the variable cost and in turn the working capital that is required. Potential for Future Research in the Philippine Setting Shifting capital expenditures (capex) to operational expenditures (opex) through cloud adoption can negatively affect many companies. This is especially true when an enterprise is choosing between the availability of working capital in terms of cash or cash equivalents and long-term loans for capital investments. Financial lease could be a way out of this situation, but this has the impact of an income statement and causes working capital pressures. References: Enqvist, J., Graham, M. and Nikkinen, J. (2014). The impact of working capital management on firm profitability in different business cycles: Evidence from Finland, Research in International Business and Finance, 32(1), 36-49. Jeng-Ren, C., Cheng, L. and Wu, H.W. (2006). The determinants of working capital management, Journal of American Academy of Business, 10(1), 149-155. Jensen, M. and Meckling, W. (1976) Theory of the firm: managerial behavior, agency costs and ownership structure, Journal of Financial Economics, 3,305-360. Johnson, R. and Soenen, L. (2003). Indicators of successful companies, European Management Journal, 21(3), 364-369.