$1.$ Basic concepts

During the wake of the financial crisis, Ben Bernanke, chairman of the Federal Reserve, said that $$shortening the cash cycle and better use of working capital$$ are the most important factors as private$-$sector businesses struggle to overcome the current economic volatility and difficulty in accessing capital markets $($IBM Global Business Services.

Given the importance of working capital management, consider the case of Fuzzy Frog Furniture Inc. and both the amount of working capital that it is using being used in the firm and explore the prospects of how its working capital will be financed.

Fuzzy Frog Furniture Inc. reported the following results for current assets and liabilities on its most recent balance sheets. Interestingly, the company$$s sales did not change$$it reported sales of $$16,650$ for its most recent year as well as for last year.

The columns labeled $$Ending $($$$)$ show results at the end of the most recent year, and the columns labeled $$Beginning $($$$)$ show results at the end of the previous year:

Beginning

Ending

Current assets

Cash $$3,900$ $$7,500$

Accounts receivable $7,5006,000$

Inventory $5,8505,100$

Current liabilities

Accounts payable $$7,200$ $$7,350$

Notes payable $4,8005,400$

Accruals $00$

Using the information given and a $365-$day year, calculate days of working capital, net working capital, and net operating working capital for Fuzzy Frog Furniture. Use your calculations to complete the following statements, and round your numerical responses to two decimal places.

$$ Fuzzy Frog$$s days of working capital improved from days in the previous year to days at the end of the most recent year.

$$ The company$$s net working capital increased from $$5,250\mathrm{.}00$ in the previous year to at the end of last year.

$$ Fuzzy Frog$$s net operating working capital increased from in the previous year to $$11,250\mathrm{.}00$ at the end of last year.

Consider the following statement:

Assuming that other things like sales remain constant, Fuzzy Frog can lower its days of working capital by reducing accounts receivable and inventory and increasing its accounts payable.

Based on your understanding of Fuzzy Frog Furniture$$s working capital, operating assets, and nonoperating assets, is this statement true or false?

This statement is true.

This statement is false.