Alternative approaches to long- versus short-term financing
The plan for each company calls for "match maturities" of assets and liabilities (362). The companies can "finance long-lived assets like plant and machinery with long-term borrowing and equity. Short-term assets like inventory and accounts receivable are financed with short-term bank loans or by issuing short-term debt like commercial paper" (362).
We have looked at plans for Dell, Gateway, and HP's individual working capital strategies, which involve adjusting each company's cash flow to better suit their needs. We discussed the cash conversion cycle and the relevance that is placed on it when projecting a company's future. From this we identified which of the liquidity or efficiency ratios were under-performing relative to the industry standard. The following section provides a recap of the ratios discussed by company, including the consequences associated with implementing or ignoring our overall recommendations.
