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Emerald City Umbrellas sells umbrellas and rain gear in Seattle, so its sales are fairly level across the year. However, it is branching out
Emerald City Umbrellas sells umbrellas and rain gear in Seattle, so its sales are fairly level across the year. However, it is branching out to other markets where it expects demand to be much more variable across the year. It expects sales in its new market to be as follows. Sales Q1 $20,000 Q2 $50,000 Q3 $10,000 Q4 $50,000 It carries inventory equal to 20% of next quarter's sales, has accounts payable of 10% of next quarter's sales, and has accounts receivable of 20% of this quarter's sales. a. Assume that it starts with $4000 in inventory, $2000 in accounts payable, and no accounts receivable for the new market. Forecast its working capital levels and changes over the four quarters. b. If Emerald City Umbrellas has net income equal to 20% of sales, what will be its financing needs over the next quarter? Current Q1 Accounts receivable Inventory $ 0 $ 4000 $ Accounts payable 2000 $ Working capital $ 2000 $ Q3 Q4 Changes in working capital b. If Emerald City Umbrellas has net income equal to 20% of sales, what will be its financing needs over the next quarter? Calculate Emerald City Umbrellas's financing needs or excess cash for each quarter. (Round to the nearest dollar.) Net income Changes in working capital Cinancing node Q1
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