Working capital cash flow. Tires for Less is a franchise of tire stores througho

Question

Working capital cash flow. Tires for Less is a franchise of tire stores throughout the greater Northwest. It has projected the unit sales and costs for each tire type for the next four months in the popup window: EEB The company policy is to have the next month's anticipated sales for each tire type in the warehouse. Shipments are made to the various stores throughout the Northwest from the central warehouse. Calculate the monthly increase or decrease in cash flow for inventory for the first three months of the year given that an increase in inventory is a use of cash and a decrease in inventory is a source of cash. Snow Tires: What is the change in working capital for January? s ( What is the change in working capital for February? Round to the nearest dollar.) s(Round to the nearest dollar.) What is the change in working capital for March? (Round to the nearest dollar.) Jestions subs Dece Rain Tires: What is the change in working capital for January? (Round to the nearest dollar.) Enter your answer in each of the answer boxes.

Explanation / Answer

The following method is used to calculate Change in working capital , given

·         The company tires for less purchases inventory in current month for next month anticipated sales

·         To calculate the increase or Decrease in inventory units for January. we will following formula

Increase or (decrease) in inventory units for January = February anticipated sales – January anticipated sales

·         To calculate the working capital change in January we will use the following formula

Working capital change in January = Increase or (decrease) in inventory units for January x cost per tire

The working of Working capital change of snow tires is calculated below for three months

particulars

Snow tires

increase or (decrease) in inventory stock

Change in working capital in $

cost per tire($)

41

41

sales-January

43000

-7000

-287000

sales-February

36000

-21000

-861000

sales-March

15000

-12600

-516600

sales-April

2400

Ø The working capital change for January is $(287000) which is decrease in inventory

Ø The working capital change for February is $(861000) which is decrease in inventory

Ø The working capital change for March is $(516600) which is decrease inventory

The working of Working capital change of Rain tires is calculated below for three months

particulars

Rain tires

increase or (decrease) in inventory stock

Change in working capital in $

cost per tire($)

32

32

sales-January

22000

10000

320000

sales-February

32000

11000

352000

sales-March

43000

-23000

-736000

sales-April

20000

Ø The working capital change for January is $320000 which is increase in inventory

Ø The working capital change for February is $352000 which is Increase in inventory

Ø The working capital change for March is $(736000) which is decrease in inventory

The working of Working capital change of All terrian tires is calculated below for three months

particulars

All terrain tires

increase or (decrease) in inventory stock

Change in working capital in $

cost per tire($)

48

48

sales-January

3000

1300

62400

sales-February

4300

3700

177600

sales-March

8000

0

0

sales-April

8000

Ø The working capital change for January is $62400 which is increase in inventory

Ø The working capital change for February is $177600 which is Increase in inventory

Ø The working capital change for March is $ 0 which is no increase or decrease in inventory

The working of Working capital change of All purpose tires is calculated below for three months

particulars

All purpose tires

increase or (decrease) in inventory stock

Change in working capital in $

cost per tire($)

38

38

sales-January

59000

-5000

-190000

sales-February

54000

-4000

-152000

sales-March

50000

15000

570000

sales-April

65000

Ø The working capital change for January is $(190000) which is decrease in inventory

Ø The working capital change for February is $(152000) which is Decrease in inventory

Ø The working capital change for March is $ 570000 which is increase in inventory

particulars

Snow tires

increase or (decrease) in inventory stock

Change in working capital in $

cost per tire($)

41

41

sales-January

43000

-7000

-287000

sales-February

36000

-21000

-861000

sales-March

15000

-12600

-516600

sales-April

2400

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