6. Robinson expects its 2012 sales and cost of goods sold to grow by 5 percent o

Question

6. Robinson expects its 2012 sales and cost of goods sold to grow by
5 percent over their 2011 levels.
a. What will be the affect on its levels of receivables, inventories,
and payments if the components of its cash conversion
cycle remain at their 2011 levels? What will be its net investment
in working capital?
b. What will be the impact on its net investment in working
capital in 2012 if Robinson is able to reduce its collection
period by five days, its inventory period by six days, and
increase its payment period by two days?

Explanation / Answer

a) Affect on its levels of receivables, inventories,and payments - Increase
Affect on net investment in working capital - Increase

b) impact on its net investment in working capital -- Decrease

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