13 A company has an accounts receivable of $75 million, accounts payable of $100

Question

13 A company has an accounts receivable of $75 million, accounts payable of $100 million and inventory of $50 million. Its annual revenue is

$200 million.

(A) What is the working capital ?

(B) How many times does it turn over its inventory per year ?

14 All of Southwest airlines competitors adopt the same jet engine maintenance programs as part of their strategy to improve. Do you expect the overall profitability of the industry to improve?

Yes                             No

15 Apple’s new strategy is to focus on producing iPhones that are made with a black case. Do you think this strategy is likely to be distinctive and can improves its profit?

Yes                             No

Explanation / Answer

a. Working capital = Current asset-Current liablities

= 50+75-100 = $25 millions

b. Inventory Turnover Ratio = Cost of goods sold/Average inventroy

200/50 = 4 times

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