After reading your report, as well as comments by others on the team, the Genesis Energy team began to understand the importance of cash flow and financing in high-growth scenarios. The Genesis Energy accountant suggested that the focus should be on developing a financial strategy that would ensure operational needs are met through short-term financing. The Genesis Energy team instructed Sensible Essential Consulting to explain in basic terms the factors and mechanics necessary to determine short-term financing needs.
As the finance expert for Sensible Essential Consulting, do the following:
Explain the concept of working capital and its importance to Genesis Energy.
Describe the mechanism and methodology used to ensure that operational needs are met through short-term financing. Explain why this methodology is important to Genesis Energy.
Explain how working capital represents the assets that are needed to carry out the day-to-day operation and how working capital can act as a source of financing or increase the need for financing.
In your response, be sure to consider the time value of money and the relative advantages and disadvantages of short-term loans versus internally generated funds.
Please complete the mini case found on pages 171–172 of your textbook, Brigham and Ehrhardt.
By the due date assigned, post your response to the Discussion Area. Through the end of the module, review and comment on at least two peers’ responses.
Write your initial response in 300–500 words.