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

Question

Working capital cash flow

Cool Water Inc. sells bottled water. The firm keeps in inventory plastic bottles at 12% of the monthly projected sales. These plastic bottles cost $0.005 each. The monthly sales for the first four months of the coming year are as follows,

January: 2,200,000

February: 2,300,000

March: 2,800,000

April: 2,900,000

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? Hint: Write the decrease as a negative number.

What is the change in working capital for January?

What is the change in working captial for February?

What is the change in working captial for March?

Explanation / Answer

What is the change in working capital for January?

change in working capital = 12%*2200000*0.005

change in working capital = $ 1320

What is the change in working captial for February?

change in working capital = 12%*(2300000-2200000)*0.005

change in working capital = $ 60

What is the change in working captial for March?

change in working capital = 12%*(2800000-2300000)*0.005

change in working capital = $ 300

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