Working Capital and Financial Environment Paper
Essay title: Working Capital and Financial Environment Paper
Working Capital and Financial Environment Paper
For every company that exists that offers a service or product to the public there is a focus on accurately measuring its current assets and liabilities in the most honest financial regulated environment possible. Brealey states that one of the most “useful summary measure[s] of current assets or liabilities” is net working capital (or just working capital). This paper will give an overview of the working capital elements for both Apple Inc. and the Microsoft Corporation for the 2006 fiscal year. Additionally, it will discuss the financial environment of both companies as it relates to regulatory bodies, the importance of control programs, effective internal control techniques, and the impact of the 2002 Sarbanes-Oxley Act.

Elements of Working Capital
The working capital of a company can be better termed as the short term financial state that a company is in. Working capital is described as the current assets and current liabilities of a company and the optimal state is to have current assets that are higher than its current liabilities. When this is not the case the company could be in jeopardy when it comes to paying its short-term debts to its creditors. Apple Inc and the Microsoft Corporation both manufacture similar products that and therefore have assets and liabilities on their respective balance sheets that are very similar. When looking at their balance sheets there are assets such as cash, short-term investments, inventories, and accounts receivable. Their liabilities include accounts such as accounts payable, accrued compensation, income taxes, and short / current long-term debt. The current assets for Apple in fiscal year 2006 are $14.5 million while Apples current liabilities for 2006 were $6.4 million (Apple 2006 Annual Report). Applying the standard working capital formula of total current assets minus the total current liabilities Apple had a working capital of $8.0 million. Microsoft on the other hand had total current assets for 2006 of $4.9 million and for the same fiscal year current liabilities of $22.4 million (Microsoft 2006 Annual Report). Applying the standard working capital formula Microsoft has a working capital of $26.6 million. Although both companies have a positive working capital, Microsoft seems to be the stronger of the two with a higher working capital by approximately three times that of Apple. However, when taking a closer look one will see that both companies have total current assets that are twice that of its current liabilities which in essence means that both companies in relation to their size are financially sound. Table 1 and Table 2, below both illustrate the total current assets and total current liabilities of each company.

Table 1. Microsoft Current Assets and Current Liabilities
June 30
Current assets:
Cash and equivalents
$ 6,714)
Short-term investments (including securities pledged as collateral of $3,065 and $-)
Total cash and short-term investments
Accounts receivable, net of allowance for doubtful accounts of $142 and $171
Inventories, net
Deferred income taxes
Total current assets
Accounts payable
$ 2,909)
Accrued compensation
Income taxes
Short-term unearned revenue
Securities lending payable
Total current liabilities
(Microsoft Annual Report 2006)
Table 2. Apple Current Assets and Current Liabilities
Cash And Cash Equivalents
Short Term Investments
Net Receivables
Other Current Assets

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Current Assets And Working Capital. (April 7, 2021). Retrieved from