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HOW IS WORKING CAPITAL CALCULATION DONE KINDLY ASSIST ON THIS, AS IT SAYS 10 % OF SALES . WHERE AS THE SALES HAVE BEEN INFLATED , BUT IN THE ANS IT SHOW SOME DIFFERENT FIGURE
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At time zero, the working capital is 130.88, which is 10% of the first years sales.
At time 1 they need the working capital to be 10% of the second years sales of 2817.26. So they need 281.73.
However they already have 130.88, so the extra cash needed is the difference of 281.73 – 130.88 = 150.85At the time 2 they need it to be 10% of the third years sales, so they need a total of 790.79.
They already have 281.73, and so the extra cash needed is 790.79 – 281.73 = 509.06And so on 🙂
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