Question

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 of: Q1 Q2 950.000 Q3 $10,000 Q4 D $49.750 Sales $19.500 It carries inventory equal to 22% of next quarter's sales, has accounts payable of 11% of next quarter's sales, and accounts receivable of 18% of this quarter's sales. a. Assume that it starts with $4,290 in inventory, $2,145 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 22% of sales, what will be its financing needs over the four quarters? a. Assume that it starts with $4,290 in inventory $2,145 in accounts payable, and no accounts receivable for the new market. Forecast its working capital levels and changes over the four quarters. Calculate Emerald City Umbrellas' working capital level in the current period and over the next four quarters: (Round to the nearest dollar.) Current Q1 Q2 Q3 Q4 Accounts receivable $ O $ Inventory 4.290 $ Accounts payable 2.145 $ Working capital 2.145 $ Changes in working capital b. If Emerald City Umbrellas has net income equal to 22% of sales, what will be its financing needs over the four quarters? Calculate Emeral City Umbrella's financing needs or excess cash for each quarter: (Round to the nearest dollar.) 02 Net income Changes in working capital Financing needs Excess cash

Answer 1

Sales Accounts receivable Inventory Accounts payable Working capital Changes in working capital Current Q1 Q2 $ 19,500.00 $ 50,000.00 $ - $ 3,510.00 $ 9,000.00 $ 4,290.00 $ 11,000.00 $ 2,200.00 $ 2,145.00 $ 5,500.00 $ 1,100.00 $ 2,145.00 $ 9,010.00 $ 10,100.00 | $ 6,865.00 $ 1,090.00 Q3 Q4 $ 10,000.00 $ 49,750.00 $ 1,800.00 $ 8,955.00 $ 10,945.00 $ - $ 5,473.00 $ - $ 7,272.00 $ 8,955.00 $ -2,828.00 | $ 1,683.00 | * The sales of Quarter 1 of next year are not mentioned. Therefore, we have considered the sales for Quarter 1 of next year to be $0. You can change the assumption on the basis of facts provided in the question. Sales Net Income (22% of Sales) Changes in Working Capital Financial Needs Excess Cash Q1 Q2 | $ 19,500.00 $ 50,000.00 $ 4,290.00 $ 11,000.00 $ 6,865.00 $ 1,090.00 $ 2,575.00 $ $ - $ 9,910.00 Q3 Q4 $ 10,000.00 $ 49,750.00 $ 2,200.00 $ 10,945.00 $ -2,828.00 $ 1,683.00 - $ $ 5,028.00 $ 9,262.00