Working Capital

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August 15, 2020 at 12:55 pm #580669
adarsh1997
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Hello John,

Please help me with the following question

-Annual Credit Sales:$27m
-Cost of sales: $15m
-Trade receivables days:50 days
-Inventory days:60 days
-Trade Payable: 45 days

What is the net investment in working capital required?

1. In the answer, trade payables is calculated as $15m *45/360.
-Please explain, why $15m was used in the calculation.

Thanks
August 15, 2020 at 3:37 pm #580685
John Moffat
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What else could you assume on the information given?

We are forced to assume that the cost of sales is all purchases on credit.
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