Question

Sports Enterprises experiences level sales on its regular product line. Recently the company has been given an opportunity to expand its product line. The expected sales for 2019 on the expanded product line are as follows:

First Quarter $125,000

Second Quarter $287,500

Third Quarter ` $ 62,500

Fourth Quarter $225,000

First Quarter 2014 $150,000

Sports Enterprises carries inventory equal to 25% of the next quarter’s sales, accounts payable of 10% of the next quarter’s sales and accounts receivables of 30% of this quarter’s sales. Assume that Sports Enterprises starts the first quarter with $10,000 of inventory on hand and $2,500 in accounts payable and zero in accounts receivable. Calculate the net working capital and change in net working capital for each quarter for the upcoming year – 2019.

Use the following format: Beginning Q1 Q2 Q3 Q4 Q1 2020 For this question use Excel.

Answer 1

Question

Answer :

			Q1	Q2	Q3	Q4	Q1
	Sales		$1,25,000	$2,87,500	$62,500	$2,25,000	$1,50,000
			2019	2019	2019	2019	2020
		Beginning	Q1	Q2	Q3	Q4	Q1
	Current Assets
	Inventory	$10,000	$71,875	$15,625	$56,250	$37,500
	Account Receivable		$37,500	$86,250	$18,750	$67,500
	Total Current Assets (A)	$10,000	$1,09,375	$1,01,875	$75,000	$1,05,000
	Current Liablities
	Account Payable	$2,500	$28,750	$6,250	$22,500	$15,000
	Total Current Liablities (B)	$2,500	$28,750	$6,250	$22,500	$15,000
	Net Working Capial ( A-B)	$7,500	$80,625	$95,625	$52,500	$90,000
	Change in Net workign Capital		$73,125	$15,000	-$43,125	$37,500
	Working Explanation
1	Inventory is calculated 25 % of Next quarter sales
			287500*25%	62500*25%	225000*25%	150000*25%
	Inventory		$71,875	$71,875	$71,875	$71,875
2	Account receivable calcuated 30% of this quarter sales
			125000*30/100	287500*30%	62500*30%	225000*30%
	Account receivable		$37,500	$86,250	$18,750	$67,500
2	Account Paytable calcuated 10% of next quarter sales
			287500*10%	62500*10%	225000*10%	150000*10%
	Account Payable		$28,750	$6,250	$22,500	$15,000
4	Net working capital	total current assets - total current liablities
5	Change in Net workign Capital		80625-7500	95625-80625	52500-95625	90000-52500
			$73,125	$15,000	-$43,125	$37,500