Question
A company expects sales of $1,500,000 next year and maintains an average inventory level of $250,000, accounts receivable of $300,000, and accounts payable of $200,000.
A company expects sales of $1,500,000 next year and maintains an average inventory level of $250,000, accounts receivable of $300,000, and accounts payable of $200,000. Calculate the working capital requirement. Discuss the importance of managing working capital efficiently and the potential impacts on liquidity, profitability, and risk. Analyze how changes in sales volume, inventory turnover, and receivables collection period can affect the working capital requirement. Consider the implications of extended credit terms and delayed supplier payments on the company's cash flow and financial health. Discuss the strategies for optimizing working capital, including inventory management techniques, credit control policies, and supplier negotiation. Explain how effective working capital management can contribute to operational efficiency, cost reduction, and competitive advantage.
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