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Working Capital Management

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Money and Currency Market Assessment
Working Capital Management

Report #3

Faculty of Business
Field of Study: Money and Currency Market
Kozminski University, Warsaw

Handed in by: Ewa Dembska, Jennifer March, Sarah Steinberger
Course: WIB-bi 13
Academic tutor: Prof. Dr. Mieczysław Grudziński

Warsaw, 25th March 2015 |
Introduction to the problem
You are the Chief Financial Officer (CFO) of BP. This afternoon you played golf with a member of the company’s board of directors. Somewhere during the back nine, the board member enthusiastically described a recent article she had read in a leading management journal. This article noted several companies that had improved their stock price performance through effective working capital management, and the board member was intrigued. She wondered whether BP was managing its working capital effectively and, if not, whether BP could accomplish something similar. How was BP managing its working capital, and how does it compare to its competitors?
Upon returning home, you decide to do a quick preliminary investigation using information freely available on the Internet.

Task 1
Obtain BP’s financial statements for the past four years from Yahoo! Finance (http://finance.yahoo.com).

See attachments Excel File: Case#3 Spreadsheet

Task 2
Obtain the competitors' ratios for comparison from Yahoo! Finance (http://finance.yahoo.com).

See attachments Excel File: Case#3 Spreadsheet

Task 3
Compute the cash conversion cycle for BP for each of the last three years.

To obtain the Average Inventory I took the inventory of the current year and the inventory of the previous year and divided it by 2. I decided for this method to generate the latest numbers for further calculations. To calculate the Average Age of Inventory I divided the Average Inventory by the Cost of Revenue for each year and multiplied by 365 days.

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