MBA518 Financial Management Assignment 10

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

2008

2007

2006

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 2008?

b.Have there been recent changes in Microsoft's liquidity?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 tradeoff in managing the firm's working capital?