1. What do we mean by net working capital?. 2. What does the DWC measure? Why is it important? 3. What does the CCE ratio measure? Why is it important? 4. What do we mean by the cash conversion cycle? Explain how it works. 5. Explain the various types of inventories that a company has to carry. Exercises: EXERCISE 1: DAYS OF WORKING CAPITAL 2012 2013 Inventories $ 450,000 $490,000 Trade receivables 360,000 385,000 Sub-total 810,000 875,000 Trade and other payables 400,000 440,000 Net working capital $ 410,000 $435,000 1. Calculate the Days of Working Capital for 2012 and for 2013. EXERCISE 2: ECONOMIC ORDERING POLICY A company decides to market its products more aggressively. Current sales are 60,000 units per year and are expected to increase by 20%. Carrying costs are $0.50 per unit, and order costs are $10.00. The firm wants to minimize its inventory costs. Calculate the companys current economic ordering quantity. EXERCISE 3: NUMBER OF ORDERS PER MONTH A company has decided to market its products more aggressively. Current sales are 30,000 units per year and are expected to increase by 50% next year. Carrying costs are $0.20 per unit, and order costs are $7.00. The firm wants to minimize its inventory costs. Questions 1. What is the projected economic ordering quantity? 2. What is the projected optimal number of orders per month?