In 2010, firms in the same business sector as the company had an average collect
ID: 2477416 • Letter: I
Question
In 2010, firms in the same business sector as the company had an average collection period of thirty days, an average payment period of 33 days and an inventory turnover of eight. Suppose the company operated its operating cycle like average firm in the sector. On December 31, 2010, What would its WCR been? Its NOCF been?
2008 2009 2010 Cash 600 350 300 Accounts Receivable 2.730 3.100 4.200 Inventories 2.800 3.200 4.300 Prepaid Expenses - - - Net Fixed Assets 1.200 1.300 1.450 Total Assets 7.330 7.950 10.250 Short-term Debt 300 500 1.900 Accounts Payable 1.400 1.600 2.050 Accrued Expenses 200 260 350 Long-term Debt 1.300 1.200 1.100 Owners' Equity 4.130 4.390 4.850 Total Liabilities & OE 7.330 7.950 10.250 Net Sales 22.100 24.300 31.600 COGS 17.600 19.300 25.100 SG&A 3.750 4.000 5.000 Depreciation Expense 100 100 150 EBIT 650 900 1.350 Net Interest Expense 110 130 260 EBT 540 770 1.090 Tax Expense 220 310 430 EAT 320 460 660 Dividends 180 200 200Explanation / Answer
Year 2010
Working Capital requirement (WCR) = [Accounts Receivable + Inventory + Prepaid expenses] minus [Accounts Payable + Accruals]
WCR = [4200 + 4300] – [2050 +350]
WCR = 8500 – 2400
WCR = 6100
Conclusion: - On December 31, 2010, WCR would have been $ 6100
Related Questions
Hire Me For All Your Tutoring Needs
Integrity-first tutoring: clear explanations, guidance, and feedback.
Drop an Email at
drjack9650@gmail.com
drjack9650@gmail.com
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.