Working capital cash flow. Cool Water, Inc. sells bottled water. The firm keeps

Question

Working capital cash flow. Cool Water, Inc. sells bottled water. The firm keeps in inventory plastic bottles at 10% of the monthly projected sales. These plastic bottles cost $0.005 each. The monthly sales for the coming year are as follows: January: 2,000,000 February: 2,200,000 March: 2,700,000 April: 3,000,000 May: 3,600,000 June: 5,500,000 July: 7,000,000 August: 9,000,000 September: 6,000,000 October: 4,000,000 November: 2,500,000 December: 1,300,000 January one year out: 2,200,000 What is the monthly increase or decrease in cash flow for inventory given that an increase is a use of cash and a decrease is a source of cash? Note: Enter a decrease as a negative number. What is the change in working capital for January? (Round to the nearest dollar.) What is the change in working capital for February? S What is the change in working capital for March? (Round to the nearest dollar.) Enter your answer in each of the answer boxes. 6

Explanation / Answer

Solution:

Calculation of the Change in Working Capital From January to December:

Month Exp. Sales (units) Ant. COGS Beginning Inventory Balance Ending Inventory Balance Working Capital Increase January 2,000,000 $10,000 200,000 220,000 $100.00 February 2,200,000 $11,000 220,000 270,000 $250.00 March 2,700,000 $13,500 270,000 300,000 $150.00 April 3,000,000 $15,000 300,000 360,000 $300.00 May 3,600,000 $18,000 360,000 550,000 $950.00 June 5,500,000 $27,500 550,000 700,000 $750.00 July 7,000,000 $35,000 700,000 900,000 $1,000.00 August 9,000,000 $45,000 900,000 600,000 ($1,500.00) September 6,000,000 $30,000 600,000 400,000 ($1,000.00) October 4,000,000 $20,000 400,000 250,000 ($750.00) November 2,500,000 $12,500 250,000 130,000 ($600.00) December 1,300,000 $6,500 130,000 220,000 $450.00 Total $244,000 $100.00

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