Accounting Assignment Essay Example | Topics and Well Written Essays - 1500 words

Accounting Assignment - Essay Example Both the Chairman’s Statement (CS) and the Chief Executive’s Review (CER) describe 2009 as a very difficult year. They both emphasized that the company’s loss before tax is a natural consequence of the drastic turnaround in the global economies. They also both affirmed the company’s commitment to do its part in combating climate change even if the prevailing adverse economic situation. They as well mention BA’s long-term goal of becoming a leader in the global arena of the airline industry. The CS tackled specific issues that pertained not just to BA but to the entire airline industry of UK. The CS is written from a point of view that sees BA as a primary industry player with respect to the rest of the industry and the business world at large. It discusses the ongoing battles for government regulations that would be favorable for the industry and for BA, the current status of BA’s talks with other airlines regarding mergers and the general trend of the world’s airline industry. The CS also talks of matters that concern BA’s shareholders such as the decision to declare no dividends and to give no bonuses to senior management for the year. In contrast, the CER covers more of BA’s internal issues. It talks of how BA’s implemented cost-cutting measures to combat ill effects of the economic slowdown and of how BA works on further improving its overall customer service to achieve even higher satisfactory ratings. It also talks of the management’s decision to give no salary increases to employees for the year. The CFO’s Report contains information that a potential investor like Paul should be interested in. One is the basic earnings per share figure that is -32.6 pence; another is the reduction of BA’s other reserves by  £988 million which will significantly reduce the company’s shareholders’ equity. The third is the recommendation of BA’s

Literature Review on Working Capital Management Essay

Literature Review on Working Capital Management - Essay Example This review is composed of only those studies which have been published and made available through books, journals, magazines and internet. There is no doubt that working capital management is an indispensible part of everyday financial management of a firm. It is commonly understood that working capital requirement is related with the day to day operations of a firm and if the firm finds shortage of working capital, the firm is likely to face liquidity problem, which in turn affect the credit worthiness and the business as a whole. On the other hand, if the working capital position is too high, it does not sound good. Rather, it is a problem of lack of proper management. In other words, too much of working capital will affect the profitability by unnecessarily blocking funds in the current assets. Therefore, finding a proper balance between shortage and excess working capital is the key element of working capital management. The firm's liquidity and profitability are judged in terms of the working capital position of the firm. Jin Mcmenamin, in his famous book 'Financial Management: An Introduction', remarks that worki ng capital is an important measure of liquidity and volume of working capital determines the risk level. The more the working capital, less is the chance of a firm's bills are not met for payment (Mcmenamin, 1999). There have been evidences on the failure of firms that have faced either shortage or excess working capital. The short term financial decisions have got little interest among academicians in the past. However, with modern scholarly and empirical studies, the literature of working capital has grown much than ever before. M. Grass observes that shortage of working capital and excess of working capital have caused many firms to fail and has affected many firm in meeting their short term obligations (Grass, 1972). L.J. Gitman also is of the same argument that working capital management, especially for small firms is the factor that decides success or failure (Gitman, 1982). However, that does not mean that working capital is the only factor that decides the success of otherwi se of a firm. As mentioned in the above paragraph, working capital should neither be excess nor inadequate. Both these conditions are dangerous to a firm. However, working capital shortage is found to be more devastating and therefore, its occurrence should be avoided at all times. An imbalanced working capital position can be expressed through another dimension. Shortage of working capital endangers the liquidity and excess working capital affects the profitability adversely. Studies have been undertaken to empirically prove the evils of these tow danger situations. K Smith, in his paper remarks that working capital is significant because it directly affects the firm's profitability (Smith, 1980). J. B. Sarkar and Saha S N, in a case study entitled 'Profitability Crisis and Working Capital Management in the Public Sector in India', observe that the profitability of the selected public sector undertakings in India is suffered owing to inefficient working capital management (Sarkar, 1987). In anoth er study by A. K. Mukherjee entitled 'Management of Working Capital in Public Enterprises' concludes that firm's liquidity and profitability are negatively correlated (Mukherjee, 1988). He further observes that firms should avoid too much of investment in current assets, if