Calculate working capital in days of sales

Following operating structure:

Sales = 100

Raw material used in the business = 30

Direct production costs = 40

Administrative costs = 20

Operating cycle:

Raw materials inventoried = 15 days

Length of production cycle = one month

Inventories of finished products = 15 days

Payment terms:

Supplier - 2 months

Customers - 1 month

Others are paid in cash

ZERO VAT, calculate working capital in days of sales.The production cycle lasts one month, which means that in-progress inventories represent one month of raw materials and 15 days of production costs.

Here are the solutions to this question -

Working Capital% of sales Time taken toValue in

Componentshift goods ordays of

Payment periodsales

Raw materials30%15 days4.5 days

+Work in progress30%x30days+40%X15 days15 days

+inventories

Of finished goods90%15 days13.5 days

+Trade receivables100%30 days30 days

-trade payables 30%60 days-18 days

=Total45 days

There are several ratios covered in the lesson but none that I can match to

These answers.