NWC + Fixed assets = Long-term debt +Equity

NWC = (Cash + other current assets) – Current liabilities

Cash = Long-term debt + Equity + Current liabilities – Current assets other than cash – Fixed assets

Operating cycle = Inventory cycle + Accounts receivable cycle

Operating cycle = Cash cycle + Accounts payable period

 How a product moves through the current asset accounts (inventory, receivable, cash)

Cash cycle = Operating cycle – Accounts payable period

1. Impacts on cash
a. No change
b. N
c. N
d. D
e. D
f. D
g. N
h. D
i. Increase
j. D
k. D
l. N
m. D
n. D
o. D

2. Cash = long-term debt + Equity + current liabilities – current assets other than cash – fixed assets

= 8,200 + 13,465 + 1,630 – 2,275 – 18,380 = $2,640

Current assets = 13465 + 8200 + 1630 – 18380 = $4915

3. Impacts on operating cycle

a. Increase
b. I
c. Decrease
d. No change
e. D
f. N

4. Impacts on cash and operating cycle

a. maybe N or I on cash cycle (depends on explanation about acc payable period), I on operating
cycle (less favourable, longer receivable period, longer oper.cycle)
b. I cash cycle, N on operating cycle (earlier payment, longer cash cycle)
c. D on cash cycle, and operating cycle (decrease acc receivable period because of no more credit,
decrease operating cycle, cash cycle decrease if acc receivable period decrease)
d. D on cash cycle and operating cycle ()
e. D on cash cycle, N operating cycle (no impact on when purchase and when pay)
f. I on cash cycle, I operating cycle (due to longer inventory period)

5.

sales 615 705 660 925

cash collections 667.5 660 682.5 792.5
end receivables 307.5 352.5 330 462.5

60 days 1 2 3 4
beg receivables 360 410 470 440
sales 615 705 660 925
cash collections 565 645 690 748.3333
end receivables 410 470 440 616.6667

30 days 1 2 3 4
beg receivables 360 205 235 220
sales 615 705 660 925
cash collections 770 675 675 836.6667
end receivables 205 235 220 308.3333

6.

item beg end average net sales 124652

inventory 9605 11302 10453.5 COGS 77681
acc receivable 4093 4994 4543.5
acc payable 4822 5749 5285.5

inventory turnover = COGS 7.43 times

avr. Inventory
inventory period = 365 49.12 days
(days' sales in receivable) inventory turnover
receivable turnover = Net sales 27.44 times
avr. Receivable
receivable period = 365 13.30 days
receivable turnover
operating cycle = inventory cycle + receivable cycle
62.42 days
payable turnover = COGS 14.70 times
avr. Payable
payable period = 365 24.83 days
payabe turnover
cash cycle = operating cycle - payable period
37.59 days
7. 365/43 = 8.49

0.002/0.48 = 2.04%

EAR = (1.0204)^8.49 – 1 = 18.716

0.020408

8.

immediately Q1 Q2 Q3 Q4 Q5
sales 650 740 875 805 747.5
payment of account 195 222 262.5 241.5 224.25
payables period 0

90 days
payment of accounts 195 222 262.5 241.5
60 days
payment of accounts 204 235.5 255.5 235.75
 Q1 Q2 Q3 Q4
sales 1640 1920 2215 2355 2050
1230 1440 1661.25 1766.25 1537.5
payment of accounts 1300 1513.75 1696.25 1690
wages, taxes, other expenses 492 576 664.5 706.5
long-term financing expenses 110 110 110 110
total 1902 2199.75 2470.75 2506.5
beg receivables 107000 sales
35% of dec 78100 223142.85714 (b)
15% of nov 28900 192666.66667 (a)

sales budget cash collection from

nov dec jan feb mar total cash collections
jan 168000 28900 44628.571429 109200 182729
feb 186000 33471.428571 33600 120900 187971
mar 199000 25200 37200 129350 191750
 mar apr may jun
credit sales 561000 689000 598000 751000
credit purchases 302000 282000 338000
cash disbursements 4
wages, taxes and expenses 137000 129000 179000
interest 15600 15600 15600
equipment purchases 53500 6600 248000

beg cash balance 182000 251650 441150

cash receipts
cash collections from credit sales 577750 622700 621650
total cash available 759750 874350 1062800
cash disbursements
purchases 302000 282000 338000
wages, taxes and expenses 137000 129000 179000
interest 15600 15600 15600
equipment purchases 53500 6600 248000
total cash disbursement 508100 433200 780600
end cash balance 251650 441150 282200