14.1. The Whole Foods Market, Inc., balance sheet for the fiscal year ending Sep

Question

14.1. The Whole Foods Market, Inc., balance sheet for the fiscal year ending September 29,2013 included the following: total current assets of $1,980 million, total assets of $5,538 million, total current liabilities of $1,088 million, and total liabilities of $1,660 million. What was the company’s net working capital on September 29, 2013? What does this tell us?

14.2. Last year Perpetual Plastics Company took an average of 46 days to pay suppliers and 38 days to collect its receivables. The company’s average days’ sales in inventory was 52 days. what was Perpetual’s operating cycle and cash conversion cycle last year?

Explanation / Answer

Solution :

14.1 The whole Foods Market, Inc's working capital is :

Working capital = Current Assets - Current Liabilities

= $1980 million - $1088 million

= $892 million

The working capital of The whole Foods Market, Inc. was positive and positive working capital generally dicates that a company able to pay off its short - term liabilities immediately.

14.2 The formula for calculating Cash Conversion Cycle (CCC) is as follows :

CCC = DIO + DSO - DPO Where,

= 52 + 38 - 46 DIO = Days Inventory Outstanding

= 44 Days. DSO = Days Sales Outstanding

DPO = Days Payable Outstanding

The Formula for calculating Operating Cycle (OC) is as follows:

OC = DIO + DSO - DPO

= 52 + 38 - 46

= 44 Days.

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