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A company has credit sales of $45 million per year, and cost of sales of $30 million per year. They have calculated working capital measures as follows :
Trade receivable days 40 days
Inventory days 30 days
Trade payable days 36 daysThere are 360 days in a year.
What is the net investment in working capital?
shwezin18: That is not what the question (or laavanyaa) is asking!
Laavanyaa:
Average receivables = 40/360 x 45M = 5M
Average inventory = 30/360 x 30M = 2.5M
Average payables = 36/360 x 30M = 3MSo net investment in WC = 5M + 2.5M – 3M = $4.5M
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