Answer to Question #24016 in Finance for Nancy Day

Question

I am so lost in all of this. can somone help me? 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 93.58
New collection period 88.58
New AR estimate 5

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?





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

Did the working capital increase or decrease from part a?

Answer 1

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