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FIN - The new CFO believes that the company could improve its working capital management

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Question;A company had the following data for the most recent year (in millions). The new CFO believes that the company could improve its working capital management sufficiently to bring its NWC and CCC up to the benchmark companies' level without affecting either sales or the costs of goods sold. The company finances its net working capital with a bank loan at an 8% annual interest rate, and it uses a 365-dday year. If these changes had been made, by how much would the firm's pre-tax income have increased?Original Benchmarkdata related CCC CCCSales 100,000Cost of goods sold 80,000Inventory 20,000 91.25 38.00Receivables 16,000 58.40 20.00Payables 5,000 22.81 30.00

 

Paper#48904 | Written in 18-Jul-2015

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