ABC Corp's finance team is forecasting the company's Net Working Capital for the next 3 years....
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
ABC Corp's finance team is forecasting the company's Net Working Capital for the next 3 years. ABC's analysts have discovered the following information: 1 ) Accounts receivable are normally collected within 90 days of sales and therefore 2 represent approximately 25% of revenues ) Purchased inventory is paid within 30 days of purchased and therefore represents 8% of COGS. 3 ) Due to supply chain issues ABC maintains approximately 6 months of inventory 4 in storage and therefore inventory balances are approximately 50% of COGS ) All other payables are paid within 60 days and are estimated to be 17% of total 5 SG&A expenses ) ABC's summary income statement for the next 3 years is as follows: Year 1 Year 2 Year 3 Revenues $ COGS $ 3,000 (2,400) Gross Profit $ 600 ssssss $ 4,000 $ 5,000 $ (3,200) $ (4,000) $ 800 $ 1,000 SG&A $ 400 $ 600 $ 800 Pre-Tax Income $ 200 $ 200 $ 200 What is ABC's Net Working Capital (excluding cash) for year's 1, 2 and 3. Hint: Forecast Receivables, Payables and Inventory first. ABC Corp's finance team is forecasting the company's Net Working Capital for the next 3 years. ABC's analysts have discovered the following information: 1 ) Accounts receivable are normally collected within 90 days of sales and therefore 2 represent approximately 25% of revenues ) Purchased inventory is paid within 30 days of purchased and therefore represents 8% of COGS. 3 ) Due to supply chain issues ABC maintains approximately 6 months of inventory 4 in storage and therefore inventory balances are approximately 50% of COGS ) All other payables are paid within 60 days and are estimated to be 17% of total 5 SG&A expenses ) ABC's summary income statement for the next 3 years is as follows: Year 1 Year 2 Year 3 Revenues $ COGS $ 3,000 (2,400) Gross Profit $ 600 ssssss $ 4,000 $ 5,000 $ (3,200) $ (4,000) $ 800 $ 1,000 SG&A $ 400 $ 600 $ 800 Pre-Tax Income $ 200 $ 200 $ 200 What is ABC's Net Working Capital (excluding cash) for year's 1, 2 and 3. Hint: Forecast Receivables, Payables and Inventory first.
Expert Answer:
Related Book For
Valuation The Art and Science of Corporate Investment Decisions
ISBN: 978-0133479522
3rd edition
Authors: Sheridan Titman, John D. Martin
Posted Date:
Students also viewed these finance questions
-
Case Analysis Critical thinking, creativity, and problem-solving are among some of the top skills needed by employers in the supply chain industry. This assignment will stretch your critical...
-
The Crazy Eddie fraud may appear smaller and gentler than the massive billion-dollar frauds exposed in recent times, such as Bernie Madoffs Ponzi scheme, frauds in the subprime mortgage market, the...
-
A UK company has a trading loss of 50,000 for the year to 31 March 2021. During the year, the company receives overseas property income (net of 40% withholding tax) of 12,000. Show the corporation...
-
FASB ASC Subtopic 715-60 requires companies to recognize a liability for their obligation to pay for retirees' health care. Prior to this rule, most companies recognized no liability for their health...
-
You have been engaged to examine the financial statements of the Town of Bridgeport for the year ended June 30, 2020. Your examination disclosed that, because of the inexperience of the town?s...
-
CMS is a claims processing company in Mobile, Alabama. Chastity Jones, a black woman, completed an online employment application for a customer service position with CMS. Jones interviewed with a...
-
Wells Technical Institute (WTI), a school owned by Tristana Wells, provides training to individuals who pay tuition directly to the school. WTI also offers training to groups in off-site locations....
-
2 1. Let I = S 1 + exc - - ex -dx. 1+ ex 0
-
Is a quantity tax better than an income tax? Explain your Answer.
-
How do postcolonial literary theories critique colonial legacies, cultural imperialism, and the representation of the Other in literature, foregrounding marginalized voices and challenging...
-
PART B Create a table "EMP_StudentID" as follows for Part B. Note: You can store the Date of Joining in any format. EMPID Name PROVINCE Date of Joining Salary 1 JOHN Nova Scotia 9 March, 1998 1000 2...
-
Suppose you already implemented a double hash table class. Running the following code to get the value of a key would return an error. 123 456 7 8 9 def get(self, key): hash1 = hash1fun (key) hash2...
-
a. Use the Product Rule to find the derivative of the given function. b. Find the derivative by expanding the product first. f(x)=(x-6)(x+4)
-
Use the selected balance sheet and income statement information below for Anka Inc. to compute the current ratio. Explain what information this ratio provides. Current Assets Pretax Income Interest...
-
Determine the % of acetic acid (MM = 60.05 g/mol) in a 2.00 mL vinegar sample that has a mass of 2.08 to two decimal places if 16.63 mL of a 0.098 M NaOH solution were used to titrate the vinegar...
-
Interview managers at three companies in your area about their use of ERP. How have their experiences been similar? What accounts for the similarities and differences?
-
The TCM Petroleum Corporation is an integrated oil company headquartered in Fort Worth, Texas. Historical income statements for 2014 and 2015 are found below (dollar figures are in the millions): In...
-
Randy Dillingwater is the chief investment officer for Clearstone Capital. Clearstone is a private equity firm located in Orlando, Florida, that specializes in what Randy describes as make-over or...
-
Harriston Electronics builds circuit boards for a variety of applications in industrial equipment. The firm was founded in 1986 by two electrical engineers who left their jobs with General Electric...
-
How much money would have to be deposited today to accumulate a. $10,000 after 6 years if the investment earns 5%/year compounded annually. b. $6,500 after 4 years if the investment earns 8...
-
What will be the amount accumulated by each of the following present investments? a. $3,000 invested for 7 years at 14 percent compounded annually b. $1,600 invested for 17 years at 12% compounded...
-
On August 1, 1958, first-class postage for a 1-ounce envelope was 4. On August 1, 2007, a first-class stamp for the same envelope cost 41. What was the annual compound increase in the cost of...
Study smarter with the SolutionInn App