# Managing working captial

Compute its operating and cash conversion cycle in each year. b. What was Robinson’s net investment in working capital each year?Problem 2- The Robinson Company has the following current assets and current liabilities for these two years:2010 2011Cash and marketable securities \$50,000 \$50,000Accounts receivable \$300,000 \$350,000Inventories \$350,000 \$500,000Total current assets \$700,000 \$900,000Accounts payable \$200,000 \$250,000Bank loan 0 150,000Accruals 150,000 200,000Total current liabilities \$350,000 \$600,000If sales in 2010 were \$1.2 million, sales in 2011 were \$1.3 million, and cost of goods sold was 70 percent of sales, how long were Robinson’s operating cycles and cash conversion cycles in each of these years? What caused them to change during this time?OC=(Accounts Receivable)/(Sales/365) Inventory/(COGS/365)OC_2010=300,000/(1,200,000/365) 350,000/(840,000/365)=243 daysOC_2011=350,000/(1,300,000/365) 500,000/(910,000/365)=299 daysCCC_2010=300,000/(1,200,000/365) 350,000/(840,000/365)-200,000/(840,000/365)=156 daysCCC_2011=350,000/(1,300,000/365) 500,000/(910,000/365)-250,000/(910,000/365)=199 days Problem 4-Suppose the Robinson Company had a cost of goods sold of \$1,000,000 in 2010 and \$1,200,000 in 2011.a.   Calculate the inventory turnover for each year. Comment on your findingsInventory turnover for 2010 =COGS/Inventory = \$1,000,000/350,000=2.857Inventory turnover for 2011 =COGS/Inventory = \$1,200,000/500,000=2.4b.   What would have been the amount of inventories in 2011 if the 2010 turnover ratio had been maintained?\$1,200,000 /inventory =2.857Inventory in 2011 to maintain 2010 turnover ratio = \$420,021.00