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AMF Written Coursework Assignment
Finance & Accounting
Pages 14 (3514 words)
AMF Written Coursework Assignment Table of Contents Answer: 1 3 Answer: 2 11 References 19 Answer: 1 a) Working Capital Trade-offs The concept of working capital trade-off is related to the relationship between profitability and liquidity. Trade-off simply means getting one opportunity at the cost of other.
On the other hand if the company wishes to take risk and generate more profit, then engagement of working capital is more in that case, so liquidity in terms of working capital in hand would have to be compromised (Ediindia, 2005). This section would be discussing the working capital trade-offs of three luxury car manufacturing companies Porsche AG, Daimler AG, and BMW. Porsche AG is a German luxury car company which was established in the year 1931. The company generated €10,928 million in the year 2011 as revenue. The working capital of the company was estimated to be around €65.8 billion in 2011, which was derived from the receivable from the customers, increasing leasing and renting charges of assets, etc (Volkswagen AG, 2011). Porsche AG met its working capital requirement through credit from banks when they were in Volkswagen Group (Porsche Automobil Holding SE, 2013). However, now the net liquidity position has improved with a 15 percent rise in sales and about 21 percent rise in the return on equity. So it can be said that Porsche no more has to rely on bank credits for working capital, but the company in 2011 negotiated with banking syndicate for extending a credit of €2.5 billion. ...
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