QUESTION 3 Working Capital ( 32 POINTS)

a) What are the key components of Working Capital and provide for each component a brief definition. (8 points)

b) For Accounts Receivables it is recommended that companies should have a credit management policy. Provide 3 examples of what this policy should cover. (6 points)

c) An auto parts supplier sells special batteries to e-car dealers and prime auto mechanics. The annual demand is approximately 1,200 batteries. The supplier pays $ 2.800 for each battery and estimates that the carrying cost is 30 percent of the batterys value (per battery per annum). It costs approximately $100 to place an order (managerial and clerical costs). The supplier currently orders 120 batteries per month. (18 points)

• Determine the ordering, carrying and total inventory costs per year for the current order quantity (8 points)
• Determine the Economic Order Quantity (EOQ). (6 points)
• Please interpret the results regarding possible adjustments to your stock holding and stock orderings. (4 points)