Working Capital and Financial Environment Paper
Rapid technological change, conglomeration, mergers, and globalization are rocking the financial industry here and abroad. In this paper we will describe and quantify the elements of working capital for the most recent year explain the functions of intermediaries and financial regulatory bodies with Citibank and JPMorgan Chase. This paper will also discuss the impact of the 2002 Sarbanes-Oxley Act on the financial systems in the United States. As financial institutions delve into a wider range of products and activities, policymakers almost certainly will have to decide whether they want to establish a single regulator to oversee all types of financial activity or whether they will be content with the segmented regulatory system long in place in the United States. The central challenge that financial regulators, especially those supervising banking activities, will face is how to deal with the rapid and increasingly complex changes in the financial arena.
Working capital is the information most people are searching for when reading a balance sheet. The calculation (current assets ? current liabilities = working capital) tells what would be left over if a company used all of its short term resources, to pay off its short term liabilities. When a company is heavy with working capital, it generally will avoid financial strain.
A company that deals with cash on a daily basis, like Citibank and JPMorgan Chase, needs very little working capital. Because they incur cash each day, both can raise funds quickly enough to stave off a financial crisis. In contrast, a company that builds tractors can not count on selling enough of its ...