Assumptions:

AR advance rate 85%

Inventory advance rates: raw material – 25%, finished goods – 50%

Ineligible AR consists of invoices aged over 90 days

Company has terms with vendors – no cash is due to vendors upon receipt of raw materials

For each scenario below calculate the impact on cash, availability and net liquidity (cash + availability)

1.Eligible AR of $100 is collected

2.Raw material of $80 is received, eligible AR of $50 is collected

3.Inventory of $100 is sold for $200

4.Raw material of $100 is received, raw material of $200 is converted to finished goods, finished goods of $50 is sold for $100, eligible invoices of $50 are collected

5.Ineligible AR of $1,000 is collected, raw material of $800 is procured, raw material of $500 is converted to

AR Raw materials Finished goods 1. Sale-new receivable Sale-relief of FG Collection - eligible Collection-ineligible Purchases Transfer to FG Total 2. Sale-new receivable Sale-relief of FG Collection - eligible Collection-ineligible Purchases Transfer to FG Total 5. 3. Sale-new receivable Sale-relief of FG Collection - eligible Collection - ineligible Purchases Transfer to FG Total 4. Sale-new receivable Sale-relief of FG Collection-eligible Collection-ineligible Purchases Transfer to FG Total Sale-new receivable Sale-relief of FG Collection eligible Collection - ineligible Purchases Transfer to FG Total Input 85% 25% 50% *** Cash Cash Cash Cash. Cash Availability Availability Availability Availability Net Liquidity Net Liquidity Net Liquidity Net Liquidity Availability Net Liquidity