Matthew Brewster, Heather Colvard
Lisa Spells, Crystal Heaton, Francis Agbonhese
Professor Maria Johnson
November 22, 2010
Working Capital Strategies Paper: Verizon Communications Incorporated
Managing billions of dollars of capital requires extensive financial knowledge and an excellent cash management strategy. The challenge is to simultaneously increase profit and minimize risk. “Important components of the firm’s financial structure include the level of investment in current assets and the extent of current liability financing (Gitman). For Verizon Communications’ Chief Financial Officer, John Killian, it is a full-time job. “A study of Fortune 1000 firms found that more than one-third of financial management time is spent managing current assets and about one-fourth of financial management time is spent managing current liabilities (Gitman). At an Earnings Call on July 23, 2010, Killian reported a year-to-date cash flow from operations of $16.9 billion, up 19.4% from the previous quarter (Alpha). This paper will present a working capital recommendation for Verizon Communications based on a 2011 revenue increase, address the effect of the increase on working capital policy, identify lessons learned and discuss areas for further development.
An analysis of the income statement for Verizon Communications reveals a substantial increase of operating expenses from 2008 to 2009, about $27 billion to $33 billion respectively. The company’s total assets have increased from 2008 to 2009, $202,352,000,000 to $227,251,000,000 respectively. This includes a $5 billion increase in property and equipment, which means that Verizon has expanded and either opened new locations or have acquired other companies. Also, when comparing the increase of $25 billion in assets, their long-term debt has only increased $9 billion.... [continues]
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