Strategic Financial Management
University of Phoenix
Finance for Managerial Decision Making / FIN 554
Professor Greg Garay
January 17, 2006

Table of Contents
Abstract……………………………………………………………………………………………3
Strategic Financial Management…………………………………………………………………..4
Working Capital Management…………………………………………………………………….4
The Kmart Corporation Debacle…………………………………………………………………..5 Long-Term and Short-Term Strategies…………………………………………………….. 6 Financial Performance………………………………………………………………………. 7
To Merge or Not to Merge………………………………………………………………………...7 Reasoning for the Merger…………………………………………………………………….8
Pros and Cons for the Merger……………………………………………………………… 9 Morale Issues…………………………………………………………………………………9
Managing International
These inventory purchases "required Kmart to borrow heavily against its $1.565 billion credit facility….Kmart's reliance on its credit facility would peak near the end of October, before holiday season sales enabled the company to begin paying down its bank debt" (Securities and Exchange Commission, 2001, p.4).
Long-Term and Short-term Strategies
Short-term investment decisions, referred to as working capital management, involve the balance of current assets and liabilities by managing cash, inventories, and short-term borrowing and lending, such as the credit terms extended to customers. The ultimate goal of working capital management is to ensure the firm is capable of continuing its daily operations and that it maintains sufficient cash flow to fulfill both maturing short-term debt and upcoming operational expenses. (Wikipedia.org, 2005, Corporate finance section) The need to improve working capital management is evident in both the simulation and the highly publicized Kmart debacle.
The inventory overbuys caused Kmart to exceed the available balance on its credit facility,