Sailboats Etc. is a retail company specializing in sailboats and other sailing-r
ID: 2774488 • Letter: S
Question
Sailboats Etc. is a retail company specializing in sailboats and other sailing-related equipment. The following table contains financial forecasts as well as current (month 0) working capital levels. During which months are the firm’s seasonal working capital needs the greatest? When does it have surplus cash?
Month
($000)
0
1
2
3
4
5
6
Net Income
$10
$12
$15
$25
$30
$18
Depreciation
2
3
3
4
5
4
Capital Expenditures
1
0
0
1
0
0
Levels of Working Capital
Accounts Receivable
$2
3
4
5
7
10
6
Inventory
3
2
4
5
5
4
2
Accounts Payable
2
2
2
2
2
2
2
Month
($000)
0
1
2
3
4
5
6
Net Income
$10
$12
$15
$25
$30
$18
Depreciation
2
3
3
4
5
4
Capital Expenditures
1
0
0
1
0
0
Levels of Working Capital
Accounts Receivable
$2
3
4
5
7
10
6
Inventory
3
2
4
5
5
4
2
Accounts Payable
2
2
2
2
2
2
2
Explanation / Answer
Ans
Ans
Working capital Requirement is the highest during the 3rd month to 5th Month