Managing working captial

Dec 5th, 2013
HelloWorld
Category:
Other
Price: $15 USD

Question description

Given Robinson’s 2010 and 2011 financial information presented in problems 2 and 4,
a. Compute its operating and cash conversion cycle in each year.
b. What was Robinson’s net investment in working capital each year?


Problem 2- The Robinson Company has the following current assets and current liabilities for these two years:
2010 2011
Cash and marketable securities $50,000 $50,000
Accounts receivable $300,000 $350,000
Inventories $350,000 $500,000
Total current assets $700,000 $900,000

Accounts payable $200,000 $250,000
Bank loan 0 150,000
Accruals 150,000 200,000
Total current liabilities $350,000 $600,000
If sales in 2010 were $1.2 million, sales in 2011 were $1.3 million, and cost of goods sold was 70 percent of sales, how long were Robinson's operating cycles and cash conversion cycles in each of these years? What caused them to change during this time?
OC=(Accounts Receivable)/(Sales/365)+Inventory/(COGS/365)
OC_2010=300,000/(1,200,000/365)+350,000/(840,000/365)=243 days
OC_2011=350,000/(1,300,000/365)+500,000/(910,000/365)=299 days
CCC_2010=300,000/(1,200,000/365)+350,000/(840,000/365)-200,000/(840,000/365)=156 days
CCC_2011=350,000/(1,300,000/365)+500,000/(910,000/365)-250,000/(910,000/365)=199 days

Problem 4-Suppose the Robinson Company had a cost of goods sold of $1,000,000 in 2010 and $1,200,000 in 2011.
a.   Calculate the inventory turnover for each year. Comment on your findings
Inventory turnover for 2010 =COGS/Inventory = $1,000,000/350,000=2.857
Inventory turnover for 2011 =COGS/Inventory = $1,200,000/500,000=2.4
b.   What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?
$1,200,000 /inventory =2.857
Inventory in 2011 to maintain 2010 turnover ratio = $420,021.00


Tutor Answer

(Top Tutor) Daniel C.
(997)
School: Rice University
PREMIUM TUTOR

Studypool has helped 1,244,100 students

8 Reviews


Summary
Quality
Communication
On Time
Value
Five Star Tutor
Dec 7th, 2016
" Outstanding Job!!!! "
kpcutie
Nov 23rd, 2016
" Excellent job "
Joemoe
Nov 14th, 2016
" <3 it, thanks for saving me time. "
Hemapathy
Nov 10th, 2016
" all I can say is wow very fast work, great work thanks "
pmallory
Nov 1st, 2016
" Totally impressed with results!! :-) "
kevin12622
Oct 18th, 2016
" Goes above and beyond expectations ! "
kiln82
Oct 9th, 2016
" awesome work thanks "
likeplum4
Sep 26th, 2016
" Excellent work as usual "
Ask your homework questions. Receive quality answers!

Type your question here (or upload an image)

1823 tutors are online

Brown University





1271 Tutors

California Institute of Technology




2131 Tutors

Carnegie Mellon University




982 Tutors

Columbia University





1256 Tutors

Dartmouth University





2113 Tutors

Emory University





2279 Tutors

Harvard University





599 Tutors

Massachusetts Institute of Technology



2319 Tutors

New York University





1645 Tutors

Notre Dam University





1911 Tutors

Oklahoma University





2122 Tutors

Pennsylvania State University





932 Tutors

Princeton University





1211 Tutors

Stanford University





983 Tutors

University of California





1282 Tutors

Oxford University





123 Tutors

Yale University





2325 Tutors