Emerald City Umbrellas sells umbrellas and rain pear 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: Q1 QZ Q3 Q4 Sales $20,000 $50,000 $10,000 $50,000 It carries inventory equal to 20% of next quarter's sales, has accounts payable of 10% of next quarter's sales, and accounts receivable of 20% of this quarter's sales. a. Assume that it starts with $4.000 in Inventory. $2,000 in accounts payable, and no accounts receivable for the new market. Forecast its working capital levels and changes over the four quarters. Answer: Calculate Emerald City Umbrellas' working capital level in the current period and over the next four quarters: (Round to the nearest dollar. Current 01 02 Q3 $ $ $ Accounts $0 receivable $ $ 9 Inventory $4.000 $ $ Accounts $2.000 Payable $ $ Working capital $2.000 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 four quarters? Answer: Calculate Emeral City Umbrella's Nnancing needs or excess cash for each quarter. (Round to the nearest dollar. Q1 92 Q3 Q4 Net Income $ $ $ $ Changes in working capital $ $ $ Financing needs $ Excess cash $ $ Emerald City Umbrellas sells umbrellas and rain pear 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: Q1 QZ Q3 Q4 Sales $20,000 $50,000 $10,000 $50,000 It carries inventory equal to 20% of next quarter's sales, has accounts payable of 10% of next quarter's sales, and accounts receivable of 20% of this quarter's sales. a. Assume that it starts with $4.000 in Inventory. $2,000 in accounts payable, and no accounts receivable for the new market. Forecast its working capital levels and changes over the four quarters. Answer: Calculate Emerald City Umbrellas' working capital level in the current period and over the next four quarters: (Round to the nearest dollar. Current 01 02 Q3 $ $ $ Accounts $0 receivable $ $ 9 Inventory $4.000 $ $ Accounts $2.000 Payable $ $ Working capital $2.000 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 four quarters? Answer: Calculate Emeral City Umbrella's Nnancing needs or excess cash for each quarter. (Round to the nearest dollar. Q1 92 Q3 Q4 Net Income $ $ $ $ Changes in working capital $ $ $ Financing needs $ Excess cash $ $
