1. What is the main determinant of net working capital? 2. Discuss the risk-return relationship involved...

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1. What is the main determinant of net working capital? 2. Discuss the risk-return relationship involved in the firm's asset-investment decisions at that relationship pertains to its working capital management? 3. Working Capital (Cash Conversion Cycle) Working Capital refers to the short-term, or current, assets of company. Liquidation of working capital accounts produces the cash that is needed to pay its current bills. If a company cannot pay its current bills, it will not survive to see the long term. As a result, poor working capital management generally results in financial distress, and perhaps bankruptcy. Therefore, Oz Trading Company expects your observations across the last 4 years of its working capital management. Data has been provided below to understand the current working capital management strategy of the business: Sales revenue Accounts Receivable Accounts Payable Inventory 2014 $'000 5,890 1,200 1,018 780 2015 $'000 8,000 1,100 1,146 918 2016 $'000 7,245 999 1,245 987 2017 $'000 10,978 870 1,435 1,345 Since Oz trading saw an increase in sales, the management decided to hold more inventories. Assuming the cost of goods sold is 65 percent of sales. a. Calculate the number of days of sales outstanding in receivables, days of sales in inventory, and days- payable outstanding for each year. What patterns do you note? b. Evaluate the company's strategy in holding more inventories and its overall working capital management. 1. What is the main determinant of net working capital? 1. What is the main determinant of net working capital? 2. Discuss the risk-return relationship involved in the firm's asset-investment decisions at that relationship pertains to its working capital management? 3. Working Capital (Cash Conversion Cycle) Working Capital refers to the short-term, or current, assets of company. Liquidation of working capital accounts produces the cash that is needed to pay its current bills. If a company cannot pay its current bills, it will not survive to see the long term. As a result, poor working capital management generally results in financial distress, and perhaps bankruptcy. Therefore, Oz Trading Company expects your observations across the last 4 years of its working capital management. Data has been provided below to understand the current working capital management strategy of the business: Sales revenue Accounts Receivable Accounts Payable Inventory 2014 $'000 5,890 1,200 1,018 780 2015 $'000 8,000 1,100 1,146 918 2016 $'000 7,245 999 1,245 987 2017 $'000 10,978 870 1,435 1,345 Since Oz trading saw an increase in sales, the management decided to hold more inventories. Assuming the cost of goods sold is 65 percent of sales. a. Calculate the number of days of sales outstanding in receivables, days of sales in inventory, and days- payable outstanding for each year. What patterns do you note? b. Evaluate the company's strategy in holding more inventories and its overall working capital management. 1. What is the main determinant of net working capital?