Working Capital Management

1. Your CFO tells you that he feels much safer to have a smaller inventory and cash level than before. What are trade-offs involved in the decision of how much inventory or cash the firm should carry. Answer for both inventory level and cash level separately.
2. Company ZaZ shows the following info in their financial statements fort he last two years. Please calculate the cash conversion cycle. What can you say about the result, is it good or bad and why.

	2017	2018
Inventory	15478	32831
Receivables	27032	36130
Payables	13393	24032
Assets	43396	49890
Sales	68141	106805
Cost of goods sold	37413	58919

Payout Policy

1. Artesia is making good profits, even though growth is slowing down a bit. So far the company has not pasid out cash to its shareholders, however the CFO wants to start paying dividends or start the repurchase program. What questions should the CFO address in ordert o decide on a possible pay out?
2. The company has paid a constant cash dividend of $7 on an annual basis for the last decade. Fort he dividend payment it used all ist earnings. The business outrlook is stable with no growth. Currently there are 250.000 outstanding shares at 50$ a share. The company eaarned again just about the right amount to pay its dividend. The CFO decides to switch instantly from cash dividends to repurchases for this year(T0). Project and compare the stock price fort he old and the new policy for next year(T1).

	New Policy			Old Policy
	Shares Outstanding	Shares Repurchased	Share Price	Share Price
T0
T1