8/6/2019 WC ratios

1/10

InputsAnnual exp sales 1200average monthly sales 100STD in monthly sales 15Carrying cost per car 1000

Cost per order 10000Time to fill order 0.5

OutputsSafety Inventory 80Optimal order quantity 154.92Average Inventory 157.46

8/6/2019 WC ratios

2/10

NPV of switching - Benefits Cost of switchingSale price 49 cost of additional units 80Variable cost 20 cost of uncollected sales 4900Quantity sold with 100 Total cost 4980

Quantity sold with 104Required rate of re 2.00% NPV 820Cash flow without 2900Cash flow with cre 3016Incremental cash fl 116PV of incremental 5800

Break even sales i 3.43

8/6/2019 WC ratios

3/10

DSO and Past dueSales 567000Number of days 90Average daily credit sales 6300AR outstanding 398000

DSO - days 63.17Credit terms 60Average past due 3.17

8/6/2019 WC ratios

4/10

Cost of trade credit1/30 net 50

Early payment discount 1%Net payment period 50Discount payment period 30

Cost of trade credit 18.43

8/6/2019 WC ratios

5/10

Cash Discount - CBA

SalesCD planned

Payment days for availing discountCost of capital for the firm% likely to accept the discountACP - presentAverage ARACP - newAverage AR - newOpportunity cost of discount offer Fund release from new CD offer Opportunity savings due to CDNet savings

Break Even point of CD

Present average collection of salesProportion which are likely to accept the discountAverage payment days of remaining salesAverage payment days of customers who accept the discountDaily opportunity cost of capitalB E point of CD

8/6/2019 WC ratios

6/10

payment days - present % of sales60 0.5

120 0.51000

1%

1020%50% payment days - new % of sales

90246.58 10 0.5

65 120 0.5178.08

568.4913.70

8.70

900.50120

100

2.728

8/6/2019 WC ratios

7/10

Average age of receivables

CF OS Month Sales CF Receivables OS

1 10% 90% Jan 100 10 902 30% 60 Feb 100 403 40% 20% Mar 100 104 20% 0% Apr 100 10

May 100 10June 100 10

8/6/2019 WC ratios

8/10

Present status Programme 1

Sales 7200 7000

Collection expenditure 180 280Projected bad debt losses as a % of s 3.50% 2%Expected % of sales taking cash discount 10%Expected collection period for custo 90 60

Monthly sales 600 583CD taken 58Sales remaining to be collected 600 525Average holding of receivables 54000 32083Average days of collection period 90 55Value of receivables holding 1775 1055

20% Cost of carrying receivables @ 20% 355 211

Bad Debt losses 252 1402% Cost of CD 14

Collection expenditure 180 280Total cost 787 645

20% Return on sales @ 20% 1440 1400Profit 653 755

8/6/2019 WC ratios

9/10

Programme 2 Programme 3

6700 6300

400 5001.50% 1%

15% 20%50 45

558 52584 105

475 42024567 19950

44 38808 656162 131

101 6320.1 25.2400 500682 719

1340 1260658 541

8/6/2019 WC ratios

10/10

Item Boeing

Current Assets 16375

Current Liabilities 13422Working Capital 2953

Non Cash Current Assets 13913Inventory 8349Accounts receivable 5564

Non cash current liabilities 12553Accounts payable 10733other current liabilities 1820Non cash working capital 1360

Revenue

% WC/ Revenue #DIV/0!