In your readings you've learned that working capital is what is referred to as the day-to-day activities of managing the firm.The concept of working capital lies mainly with the firm's current assets and current liabilities.

The following table contains current assets and current liability balances for Microsoft Corporation (MSFT):

2016 2015 2014

Cash and cash equivalents 10,339,000 6,111,000 6,714,000

Short term investments 13,323,000 17,300,000 27,447,000

Net receivables 15,606,000 13,237,000 11,256,000

Inventory 985,000 1,127,000 1,478,000

Other current assets 2,989,000 2,393,000 2,115,000

Total current assets 43,242,000 40,168,000 49,010,000

Accounts payable 12,830,000 6,612,000 9,521,000

Short/current long-term debt 0 2,741,000 0

Other current liabilities 17,056,000 14,401,000 12,921,000

Total current liabilities 29,886,000 23,754,000 22,442,000

a. Assume that you are the lead banker for the syndicate of banks that manage Microsoft Corporation's line of credit.Your boss has asked that you report to him on the current state of Microsoft's liquidity.How would you describe the liquidity of Microsoft in 2016?Be sure to talk about the firm's current liabilities and current assets and in your description.

b. Have there been changes in Microsoft's liquidity over the past 3 years shown?If so, have the changes been to improve the firm's liquidity?Explain your observations.

c. Calculate the firm's working capital for the 3 years.What is the trade off in managing the firm's working capital?Is it possible for a firm to have a negative working capital measurement?Under what conditions can this happen?Is this always a cause for concern?If so, when is it dangerous?