Executive Summary Managing Working Capital in an Affiliation with Sappi Fine Paper Europe as a Demonstration of Evidence The working capital ratio is a key figure in financial management. It characterizes how much financial funds are required by short term, operating activities. The calculation of working capital functions are as so; Inventory + Trade Receivables – Trade Liabilities. The core objective is maintaining the lowest working capital as possible in order to reduce financial responsibility
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million, the net book value is $4.6 million, and the estimated remaining useful life is five years. We also assume that no matter which decision is made, the net working capital will be released for use and can be used for calculations in ECF. This is because no matter when and how the ship will be retired or sold back, the net working capital will be
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Case 16: REED’S CLOTHIER, INC.: WORKING CAPITAL POLICY As Jim Reed slowly walked the two blocks between the bank and his store, he knew his business was in serious financial trouble once he talked to his new banker, Holmes. He knew that there was something that had to be done to regain control. He had everything going wrong from the inventory being too much to the accounts receivables not being paid on time which were causing him not to be able to raise the cash required to meet its financial
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from VMI and his banking officer was too. I believe that these cozy relationships might have been the cause of the financial distress that occurred in this case. Jim's banking officer was lenient, because he was a friend. Jim had adopted a loose working capital policy with higher current assets than industry averages. Jim's customers were slow to pay A/R because they were friends and Jim was afraid of losing their business if he pressed them too hard. His sales overall might suffer if he losses these
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Super Project EXECUTIVE SUMMARY When Crosby Sandberg stated in the opening paragraph of the case, “What I learned about incremental analysis at the Business School doesn’t always work.” He came to the conclusion that sunk costs were relevant to capital project evaluations. In this case though, he could not have been more wrong. The sunk costs are lost once they are spent, and should definitely not be used to evaluate the Super Project. General Foods is a large company with various divisions in
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aggressive financial policy the net working capital position would be at $42.50 million and the current ratio would be at 2.81. According to the moderate financial policy the net working capital position would be at $49 million and the current ratio would be at 3.88. The conservative financial policy has the net working capital position would be at $55 million and the current ratio would be at 6.00. Based on the aggressive financial policy the net working capital is at its lowest as is the current
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If operating capital as of 12/31/2010 is $502.2 million, what is the free cash flow for 12/31/2011? Net Operating Working Capital = (Cash +A/R+ Inventories) NOWC = 5.60 +56.2 +112.4 = 174.20 Net Plant and Equipment = (A/P +Accruals) = (11.20 + 28.10) = 39.30 Operating Capital= (NOWC – NPE) 174.20 - 39.30= 134.90 Total Operating Capital=(Operating Capital + NPE Projected (Given) 134.90 + 397.50 =532.40 Change in Operating Capital= (Total Oper. capital – Operating
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CONCH REPUBLIC ELECTRONICS Corp.1 Conch (pronounced “konk”) Republic Electronics Corp. is a mid-sized electronics manufacturer located in Key West, Florida. The company president is Shelly Couts, who inherited the company. The company originally repaired radios and other household appliances when it was founded over 70 years ago. Over the years, the company has expanded and it is now a reputable manufacturer of various specialty electronic items. Jay McCanless, a recent Finance graduate, has been
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Krispy Kreme DoughnutsQuestion 1: Analysts are predicting that Krispy Kreme will be able to perform highly effectively andcontinue to grow rapidly in the coming two years. Do you agree with their analysis? If so, why? If not,why not? Key factors underlying growth: 1.Brand based on high quality product, highly differentiated products, high-volume production2.Fragmented (regional) competition with less brand recognition3.Strong opportunities to extend network of stores geographically.4.Great steps
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equity, net working capital position, and current ratio. According to Gitman (2009), profitability is “the relationship between revenues and costs generated by using the firm’s assets-both current and fixed-in productive activities” (p. 639). The firm chooses to increase their profits but must do so by increasing revenue and or decreasing cost. Risk is “the probability that a firm will be unable to pay its bills as they come due” (Gitman, 2009, p. 639). If a firm’s net working capital is high it
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