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.






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?

Receivables Inventories Payments
Net investment in working capital
New Sales Sales/day New COGS COGS/day

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?







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

Receivables Inventories Payments
Net investment in working capital
New Sales Sales/day New COGS COGS/day

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

All components grow by 20 percent. So receivables, inventories and payments and net investment in working capital will be by 20% bigger then in 2011. ================================================================================================================================== b. it will be positive impact but numerical expression depends on part of inventory and level of change.

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