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Working Capital Questions   Term Paper ID:45856 Click to get this paper

Essay Subject: Seven questions involving the effects of business transactions on working captial including an inventory ...... More...

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Paper Abstract: Seven questions involving the effects of business transactions on working captial including an inventory reductuion plan. Paper Introduction: Answers to Working Capital QuestionsDefinition of Working Capital The total of assets minus liabilities thatwill be used or come due within one year a Paying out a million dollar cash dividend would decrease cash a short term account and retained earnings a long term account Therefore it would decrease both cash and working capital b A previous sale is recorded under accounts payable which is working capital So cash would increase in this transaction but working capital would stay the same c Text of the Paper: The entire text of the paper is shown below. However, the text is somewhat scrambled. We want to give you as much information as we possibly can about our papers and essays, but we cannot give them away for free. In the text below you will find that while disordered, many of the phrases are essentially intact. From this text you will be able to get a solid sense of the writing style, the concepts addressed, and the sources used in the research paper. The inventory would be sold for cash, which would not initiallyaffect working capital because it just trades one type of asset foranother. A previous sale is recorded under accounts payable, which is working capital. b. This is a less popular way of lookingat the problem. However, if the cash were paid asa dividend or used to decrease long term debt then working capital woulddecrease. So selling short-term marketable securities for cash increases cash but has no effect working capital. d. e. Bills owed to a supplier are under accounts payable, which is a short term account. However, most marketable securities are cash equivalents and are even included in the cash reporting on the financial statements. This is the standard accounting answer to the question. Marketable securities are generally considered to be included in working capital. a. A new computer system is a substantial capital investment.Since it gives the company the ability to forecast sales and inventoryshortfalls, it gives the company the power to reduce its inventory. Long-term debt is not part of working capital. Answers to Working Capital QuestionsDefinition of Working Capital: The total of assets minus liabilities thatwill be used or come due within one year. f. So the inventory period would be shortened and the cash cycleas well. So there would be no effect on cash or working capital. If the cash is then used to pay off short term debt, the netchange in working capital would be zero. Whether the cash cycle is shortened or not depends on how you look atthe inventory. It depends on how long the company expects to hold them. Cash would not be affected. If the company owns stock as part ownership in another company, that is a long-term investment even though they can be sold at any time. However if the backup inventory is not expected to be used but is onlythere as a buffer, then you could argue that the cash cycle does not changebecause the moving inventory is a short term asset whereas the inventorybuffer is actually a long term asset. c. For example, an ice cream shop uses all of its raw materialseventually. Paying out a $2 million dollar cash dividend would decrease cash, a short term account, and retained earnings, a long term account. So while cash would decrease, so would the liability, and working capital would stay the same. So cash would increase in this transaction but working capital would stay the same. Therefore it would decrease both cash and working capital. So borrowing long-term to finance inventory would increase working capital. Borrowing short term decreases working capital, but buying inventory increases it. If this paper is not what you are looking for, you can search again: Search for: or Click here to request an essay written just for you.