Anyone can help me for this(question 7) please, need it asap!!! (finance-working

Question

Anyone can help me for this(question 7) please, need it asap!!! (finance-working capital management)

7. Use JW Inc.s financial statements to calculate the following The current ratio, quick ratio, NWC, and WCR. Discuss the observed 2-year trend The CCC and its components. Discuss the observed 2-year trend a. b. JW, Inc.: Income Statement 2016 2015 Sales COGS Gross Profit Operating Expenses Depreciation EBIT Interest Expense EBT Taxes NI Dividends ARE 5,700.00 $ 4,560.00) 1,140.00 ($ 500.00) ($ 27.00) $613.00 ($ 35.00) 578.00 ($ 231.20) $ 346.80 5,050.00 $ 4,040.00) $1,010.00 ($ 420.00) $ 26.00) $394.00 ($30.00) 364.00 ($145.60) $ 218.40 $ 346.80 $ 218.40

Explanation / Answer

a.

WCR or WC requirement

[(AR+Inventory) - (AP + Accruals)]

The trend is going positively good for the company. The current and quick ratio are fairly above the standard range which means company has ready cash available in hands to meet its short term obligations. The WCR has lessened in 2016 which indicates a lower requirement of funds in the current year for the company.

b.

CCC or cash conversion cycle covers the total time required for a company to convert its resources and inputs into liquid cash. It is calculated as

CCC = DIO + DSO - DPO

CCC here calculated for 2015

2015:

DIO = (Inventories/COGS) x 365 = 340/4,040 x 365 = 30.72 days

DSO = (AR/Sales) x 365 = (500/5,050) x 365 = 36.14 days

DPO = (AP/COGS) x 365 = (300/4,040) x 365 = 27.10 days

Find out the same for 2016. Then compare the results and discuss the trend.

Particulars 2016 2015 Current ratio (CA/CL) 1514.8/371 = 4.08 960/360 = 2.67 Quick ratio [(CA-Inventory)/CL) (1514-300)/371 = 3.27 (960-340)/360 = 1.72 NWC (CA-CL) 1514-371 = 1143 960-360 = 600

WCR or WC requirement

[(AR+Inventory) - (AP + Accruals)]

800-331 = 469 840-310 = 530

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