Sailboats Etc. is a retail company
specializing in Sailboats and other sailing equipment. The following table is
contains financial forecast as well as current (month 0) working capital
levels. During which months are the firms seasonal working capital needs greatest? When does it have surplus cash?
000 0 1 2 3 4 5 6
Net Income
10.12 12.36 14.92
25.39 29.79 17.69
Depreciation
1.98 2.96 2.97 3.91 5.02 4.05
Capital expenditure
1.03 0.00
0.00 1.15 0.00 0.00
LEVELS OF WORKING CAPITAL
Account Receivable 1.93 2.93 4.02 5.02 7.07 10.09 5.94
Inventory 3.04
2.05 4.08 5.08 4.97 3.96 2.05
Account Payable 2.08 2.01 2.01 1.92 2.01 2.09 2.05
000 month
1
Calculate the change in receivable (round
to two decimal place)
Calculate the change in inventory (round to
two decimal place)
Calculate the change in payable (round to
two decimal place)
Calculate the change in net working capital
(round to two decimal place)
2. The fast reader company supplies bulletin board services to
numerous hotel chains nationwide. The owner of the firm is investigating the
benefit of employing a billing firm to do her billing and collections. Because
the billing firm specializes in these services collection float will be reduced
by 23 days. Average daily collections are $1,250 and the owner can earn 7%
annually (expressed as an APR with monthly compounding) on her investments. If
the billing firm charges $350 per month should the owner employ the billing
firm? The benefits are ?
