In problem 10, we assumed the current asset and liability accounts decrease proportionately with Genatron’s sales.  This is probably unrealistic following a decline in sales.  What will be the impact on the working capital accounts if its collection period lengthens by five days, its inventory period lengthens by seven days, and its payment period lengthens by three days if Genatron’s sales and COGS fall 5 percent from their 2020 levels?

Data from Problem 10.

With concerns of increased competition, Genatron is planning in case its 2021 sales fall by 5 percent from their 2020 levels.  If cost of goods sold and the current asset and liability accounts decrease proportionately.

Financial statements for the Genatron Manufacturing Corporation for 2020 and 2019.

Balance sheet ASSETS	2020	2019
Cash	$40,000	$50,000
Accts. receivable	260,000	200,000
Inventory	500,000	450,000
Total current assets	800,000	700,000
Fixed assets, net	400,000	300,000
Total assets LIABILITIES AND EQUITY	$1,200,000	$1,000,000
Accts. payable	$170,000	$130,000
Bank loan	90,000	90,000
Accruals	70,000	50,000
Total current liabilities	330,000	270,000
Long-term debt, 12%	400,000	300,000
Common stock, $10 par	300,000	300,000
Capital surplus	50,000	50,000
Retained Earnings	120,000	80,000
Income statement	2020	2019
Net sales	$1,500,000	$1,300,000
Cost of goods sold	900,000	780,000
Gross profit	600,000	520,000
Expenses: general and administrative	150,000	150,000
Marketing	150,000	130,000
Depreciation	53,000	40,000
Interest	57,000	45,000
Earnings before taxes	190,000	155,000
Income taxes	76,000	62,000
Net income	$114,000	$93,000