Financing the Short Term Obligations of The Business Coursework - 1

Financing the terse Term Obligations of The Business - Coursework ExampleTrade Credit implies the allowance of credit businesses by the providers of raw materials and other equipment. In this type of financing, though no cash is allotted to the business, but it is given the liberty to decelerate the payment for the goods up to the callination of the credit. Bank Credit is another popular offset of terse term financing which allows businesses to draw credit at once or in phases. There argon unhomogeneous sub-categories of Bank Credit such as Loans, Cash Credit, Overdraft and Discounting of Bill. The third brusk term financing source is Customers Advances in which businesses ask customers to pay a part of their payment in advance. This is often the case when orders are large as it facilitates the company to overcome its short-term necessities. The fourth source is Account Receivables which are interchange to bank or any other finance company through Factoring. In this manner, the business interchange the receivables gets the amount while the finance company takes over all the associated credit risks (World Academy Online, 2011) Task 2 1. Activision Blizzard Inc as well as electronic Arts Inc. have financed their short term requirements chiefly through Bank Credits and to some extent through the selling of Accounts Receivables too. In case of Electronic Arts Inc, short term obligations form the bulk of the total liabilities, indicating the high dependence on short term financing (Electronic Arts Inc, 2012). In contrast to Electronic Arts, Activision Blizzard uses relatively less short term obligations in terms of relative percentages (Activision Blizzard Inc, 2012) 2. Activision Blizzard Inc. Liquidity Ratios 1. menstruation Ratio = real Assets / Current Liabilities (2011) = 5,385,000,000 / 2,907,000,000 =1.85 x 2. Quick / Acid Test Ratio = (Current Assets Inventory) / Current Liabilities (2011) = (5,385,000,000 112,000,000)/ 2,907,000,000 =1.81 x E fficiency Ratios 3. debitor long time = Account Receivables / (Sales/360) (2011) = 1,280,000,000 / (4,447,000,000/360) =103.62days 4. Creditor Days = Accounts Payable / (Sales/360) (2011) = (1,181,000,000) / (4,447,000,000/360) =95.61 days 5. Stock Turnover Days = (Inventory x 360) / court of Goods Sold (2011) = (112,000,000 x 360) / 2,126,000,000 =18.96 days Electronic Arts Inc Liquidity Ratios 6. Current Ratio = Current Assets / Current Liabilities (2011) = 3,032,000,000 / 2,001,000,000 =1.52 x 7. Quick / Acid Test Ratio = (Current Assets Inventory) / Current Liabilities (2011) = (3,032,000,000 77,000,000) / 2,001,000,000 =1.48 x Efficiency Ratios 8. Debtor Days = Account Receivables / (Sales/360) (2011) = 391,000,000 / (3,589,000,000/360) =39.22 days 9. Creditor Days = Accounts Payable / (Sales/360) (2011) = (996,000,000)/ (3,589,000,000/360) =99.91 days 10. Stock Turnover Days = (Average Inventory x 360) / Cost of Goods Sold (2011) = (77,000,000 x 360)/ 1,499,000,000 =18.49 days 3. Activision Blizzards current ratio is greater in contrast to that of Electronic Arts Inc. It suggests that Activision is covering its short term obligations with its current assets in better manner. This suggests that in case of any possible emergency in future, Activision will stand a better detect of overcoming it because of its higher current ratio whereas Electronic Arts would comparatively find it difficult. In this manner, Activision