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Report on Working Capital Strategy

   

Added on  2020-06-04

10 Pages2564 Words183 Views
Financial Strategy
Report on Working Capital Strategy_1
TABLE OF CONTENTSINTRODUCTION...........................................................................................................................1TASK 1............................................................................................................................................1a) capital structure of GDF SUEZ's............................................................................................1b) Debt-Equity advantages and disadvantages............................................................................2TASK 2............................................................................................................................................4a) Short term financial performance and Matching principle.....................................................4b) Working capital strategy of GDF SUEZ's..............................................................................5CONCLUSION................................................................................................................................6REFERENCES................................................................................................................................7
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INTRODUCTIONCapital structure of the company, defines the amount of debt used by the organisation incomparison to the equity. Capital structure of the company can be measured by eithercalculating financial leverage or by analysing the capital structure ratio. An optimal capitalstructure leads to maximise the profit of an organisation along with reducing its cost of capitaland also helps in maintaining the balance between risk and return. In the present report; Debtequity and working capital strategy of GDF SUEZ has been determined and interpreted. Thereport includes the type of capital structure and working capital strategy which the business unithas adopted along with its advantages and disadvantages. TASK 1a) Capital structure of GDF SUEZ'sIn order to determine the capital structure of any organization, debt and equity financingcomponents are used to fund the operations of the organisation are analysed (Rampini andViswanathan, 2013). Company's return on invested capital maximises and its credit, default andbankruptcy risks minimizes with an optimal capital structure. Management can use debt-equityposition ratios to determine the capital structure of the organization. These ratios guide tooptimise the capital structure of the company. Debt ratios are also used by creditors andinvestors in order to make inputs in their financial models. Another tool to determine the capital structure is by evaluating financial leverage. It is theamount of debt which is used to buy more assets of the company is its financial leverage amount.It is calculated by measuring total debt to total asset ratio. More the proportion of debt increases,more is the financial, leverage amount (Financial leverage, 2017). In order to analyse capitalstructure of GDF SUEZ's capital structure, following ratios have been calculated:Financial leverage ratio: Total debt / Total AssetsParticulars20142013Total asset165305155932Current liability5149846743Non-current liability5784955530Total debt109347102273Financial leverage ratio66.1565.591
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