| Prob 15-2 | 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? |
| | | 2010 | 2011 |
| | AR period |
| | Inventory period |
| | AP period |
| | Operating cycle |
| | Cash conversion cycle |
| Prob 15-3 | The Robinson Company from Problem 2 had net sales of $1,200,000 in 2010 and $1,300,000 in 2011. |
| | a. Determine the receivables turnover in each year. |
| | | 2010 | 2011 |
| | AR turnover |
| | b. Calculate the average collection period for each year. |
| | | 2010 | 2011 |
| | Average collection period |
| | c. Based on the receivables turnover for 2010, estimate the investment in receivables if net sales were $1,300,000 in 2011. |
| | Receivables investment |
| | d. How much of a change in the 2011 receivables occurred? |
| | Expected change in AR |
| | Actual change in AR |
| Prob 15-4 | 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. |
| | | 2010 | 2011 |
| | Inventory turnover |
| | Comments: |
| | b. What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained? |
| | Inventories investment |
| Prob 15-5 | 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. |
| | | 2010 | 2011 |
| | Sales |
| | COGS |
| | Profit margin |
| | AR |
| | Inventory |
| | AP |
| | Sales/day |
| | COGS/day |
| | Inventory conversion period |
| | Average collection period |
| | Average payment period |
| | Operating cycle |
| | Cash cycle |
| | b. What was Robinson’s net investment in working capital each year? |
| | | 2010 | 2011 |
| | Net investment in working capital |
| Prob 15-6 | Robinson expects its 2012 sales and cost of goods sold to grow by 5 percent over their 2011 levels. |
| | a. What will be the affect on its levels of receivables, inventories, and payments if the components of its cash conversion |
| | cycle remain at their 2011 levels? What will be its net investment in working capital? |
| | Receivables |
| | Inventories |
| | Payments |
| | Net investment in working capital |
| | New Sales |
| | Sales/day |
| | New COGS |
| | COGS/day |
| | b. What will be the impact on its net investment in working capital in 2012 if Robinson is able to reduce its collection |
| | period by five days, its inventory period by six days, and increase its payment period by two days? |
| | New Sales |
| | Sales/day |
| | New COGS |
| | COGS/day |
| | Estimated AR if reduced by 5 days |
| | Old collection period |
| | New collection period |
| | New AR estimate |
| | Estimated Inventory if conversion period reduced by 6 days |
| | COGS/day |
| | Old conversion period |
| | New conversion period |
| | New inventory estimate |
| | Estimated AP if payment period increased by 2 days |
| | COGS/day |
| | Old payment period |
| | New payment period |
| | New AP estimate |
| | 2012 working capital |
| | Did the working capital increase or decrease from part a? |
| Prob 15-7 | Robinson expects its 2012 sales and cost of goods sold to grow by 20 percent over their 2011 levels. |
| | a. What will be the affect on its levels of receivables, inventories, and payments if the components of its cash conversion |
| | cycle remain at their 2011 levels? What will be its net investment in working capital? |
| | Receivables |
| | Inventories |
| | Payments |
| | Net investment in working capital |
| | New Sales |
| | Sales/day |
| | New COGS |
| | COGS/day |
| | b. What will be the impact on its net investment in working capital in 2012 if Robinson is able to reduce its inventory |
| | period by ten days? |
| | Estimated AR if reduced by 0 days |
| | Sales/day |
| | Old collection period |
| | New collection period |
| | New AR estimate |
| | Estimated Inventory if conversion period reduced by 10 days |
| | COGS/day |
| | Old conversion period |
| | New conversion period |
| | New inventory estimate |
| | Estimated AP if payment period increased by 0 days |
| | COGS/day |
| | Old payment period |
| | New payment period |
| | New AP estimate |
| | 2012 working capital | | supposed to be 680547.95 |
| | Did the working capital increase or decrease from part a? |
Dahayn
week_7.xlsx
