Ford Motor Company and AT&T: A Comparison of Working Capital Strategies

(A) Issue identified in the scenario that is also facing the company

None of the cash flow issues facing Lawrence Sports is a significant problem for AT&T. Its is using cash, primarily for investment in its wireless service and the introduction of the Apple 3G phone, and increased dividends paid after repurchasing approximately 195 million shares. It also increased its investment in new construction by $2.26 billion. It shows no indication of problems in meeting its obligations. It is deliberately increasing investments in what amount to plant and equipment while repurchasing shares on the open market. This caused the shareholder equity to decrease $2.8 billion, but that was after an increase in treasury shares of $5.7 billion which effectively reduced reported stockholder equity. The repurchased shares produced a decrease in shares outstanding, but are available for reissue, which would alter stock equity.

(B) How the company responded to the issue

The underlying issue in the scenario is inability to collect receivables. At the same time the company has utilized it credit line to the full. The statements of AT&T indicate none of these problems. Receivables are up only slightly on higher revenues. The fact that the company was able to purchase several billion of its common stock in the open market is not indicative of a cash shortage.

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capital position. This is far more serious that the situation in the scenario that can be traced to problems in collecting receivables. Interestingly enough, Ford's working capital, which must be computed from the financial information supplied, did not change dramatically from a year earlier. In fact, as computed here, the current ratio actually improved marginally. What this implies is actually superb working capital management under very difficult conditions. (Ford Motor Company, 2008) (Ford Motor Company2, 2008) While Ford does not provide it, it is possible to compute something similar to working capital for the automotive group. Ford Motor Company, Like General Motors and other auto companies is actually a large scale manufacturing enterprise connected to a specialized bank; in this case Ford Motor Credit which loans customers the funds to purchase Ford Cars. Clearly, both companies are having financial problems as this is written. This project will concentrate on the manufacturing arm as the banking operation has far different financial characteristics than a manufacturing company and the terms working capital does not really apply. It is clear that the auto division, while still solvent as seen it

Category: Business - F