Williams Company - Essay Example

New business direction promised opportunities for the Williams Company and resulted in high revenue growth during 1998-and 2001. An examination how strategy is formed gives useful insights into the nature of financial strategy itself. In 1999 Williams decided to list WCG (Williams Conunumcatiort Group) in initial public offering. It was made to have a major source of finance from shares came in the form of IPO that raised approximately $650 million and 5725 million raised through placements to private investors.

The main problem was that Williams did not take into account rapidly changing environment of the telecommunication industry, long-term predictions as for its financial activity, and economic peculiarities of the industry. There were two main problems led into collapse: the industry suffered from over production and it could not fared well in the economic downturn. Williams took pains to improve the situation by newly issues shares of WCG equity. Again, Williams faced with the problem of indirect "credit support" WCG's debt" provided for WCG.

In accordance with the legislation it was treated as "pff balance sheet," and did not appear as a liability on the firm's balance sheet. An addition to this in April, 2002 the state security started investigation process as for WCG's financial activity. Accept WCG financial problems Williams faced problems with Energy Marketing and Trading Divisions caused by the unstable market situation. Credit ratings and rising yields on the trade worsen the situation and created another problem for Williams traders which needed a credit but were unable to get it from counterpartsAfter these nuisances, Williams developed new financial strategy based on "aggressive program of asset sales" and capital expenditure.

The plan to cut investment was developed in previous years and was the promising one to help Williams to overcome financial crisis. The investment made by warren Buffin in Williams allowed Williams to achieve financial flexibility and economic stability at the middle of 2002, but did not sole the main problems. In addition, Berkshire Hathaway and Lehman Brothers offered a 900 million dollar loan to Williams, but on the strict terms. Williams financial reporting involves the collection and presentation of data for use of financial management and accounting.

According to the Exhibit 2 and 3, the main financial figures of the Williams companies main positions are high in comparison with Domination Recourses, Murphy Oil, except Dynegy company. The net income of William applicable to common shares figure has the highest rate between 1999-2001. According to the financial data Williams Company has the market value on equity which increased between 1999 and 2000, but failed in 2001; only Dominion resources has the highest rate. The figures of the total assets of Williams Company show the stable growth in 1999 and 2000.

Because of the crisis affected the company the level of total assets decreased 1,5% in 2001 but remains the highest in comparison with its competitors. The cash flow investment activity was $1,970M (1999), 2,337M (2000) and 3, 543M (2001). Only Dominion Resources has the high figures in 2001.It is known that EBITDA is used to analyze the profitability between companies and industries, because it eliminates the effects of financing and accounting