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Company s annual sales are EUR 1 0 0 m . WCR is 7 2 days of sales on average and receivables 6 2 days
Companys annual sales are EURm WCR is days of sales on average and receivables days of sales. Assuming a increase in sales, resulting primarily from an increase in exports, to customers who are granted more generous payment terms. Receivables rise by days to days of sales on average. We assume that despite this increase in sales, inventories and account payables remain stable in number of days. Calculate the increase in WCR if receivables remain stable at days vs days of sales on average and sales are mEUR My answer: Assuming only the level in sales will increase but all other variables will stay the same in the WCR equation, then the WCR will grow proportionally to the sales by Since the WCR is still days the calculation will be x EUR EUR. This will be a increase to the EUR WCR at a level of Mio. Sales x Is my answer right?
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