Calculate Hbs's

Questions

1. Calculate HBS's cash cycle for the fourth quarter

Inventory Period= 90 / (1149.9 / 1302.1) = 101.91

Average collection period= 90 / (1543.9 / 1338.8) = 78.04

Average Payment Period= 90 / (1149.9 / 304.4) = 23.82

Cash Cycle= 101.91-78.04-23.82 = 156.13

(B) Explain the Meaning of your estimated.

 Cash Cycle has a decreasing trend during 1995.

It happens due to the decrease in the duration of higher inventory turnover and customer revenues than during the rotation of payments to suppliers.

However, it is observed that in the last quarter growth cycle occurs from 100.31 to 156.13 cash days due to increasing IP and ACP and because of remaining approximately constant value of APP.

This means that during the time of payment of cashing supply to the increased sales. So now need to attract resources   for operational cycle for a longer period.

Also it can be seen that during the collection of clients is larger than the period of payment of suppliers (78.04> 23.82). This is not good because normally these two durations should be close in value, and ideally during payment providers should be higher than during the collection of customers.

The low level of cash cycle in the second and third quarter can be explained by the fact that the company activity takes place mainly during this period, winter is not too much demand for construction material.

2.      What is HBS's working capital in each quarter of 1995?

WC = Receivables + Inventory - Accounts Payable

3.      (a) Estimate the firm's seasonal working capital.

Estimate seasonal WC = WCmax - Wcmin = 2969.2 -2015.6=953.6

(B) Estimate its permanent working capital.