Robinson expects its 2012 sales and cost of goods sold to grow by 20 percent ove

Question

Robinson expects its 2012 sales and cost of goods sold to grow by 20 percent over their 2011 levels.
b. What will be the impact on its net investment in working capital in 2012 if Robinson is able to reduce its inventory
period by ten days?
Estimated AR if reduced by 0 days
Sales/day
Old collection period
New collection period
New AR estimate

Estimated Inventory if conversion period reduced by 10 days
COGS/day
Old conversion period
New conversion period
New inventory estimate

Estimated AP if payment period increased by 0 days
COGS/day
Old payment period
New payment period
New AP estimate

2012 working capital

Did the working capital increase or decrease from part a?

Explanation / Answer

The impact on its net investment in working capital in 2012 if Robinson is able to reduce its inventory period by ten days - Decrease

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