Student
working capital for Apex Printing
Mary sees you pass by her office the next day and waves you in to talk.
"Good morning," she says. "I need you to write some content for a report I'm preparing. I could do it myself, but I can't get to it before I have to leave town on business. This piece of the report is fairly straightforward. Given your expertise, I think you'll do a good job with it."
"Sure," you say. "Whatever I can do to help.""Okay, good," she says. "This report is for potential investors. The section I want you to write is about working capital. I'd like you to explain what working capital is and provide an equation that can be used to compute it. Then follow that up by computing the working capital for Apex, using the same balance sheets you have for the PowerPoint presentation you're working on. Make sure to describe the trend."
"I think I understand what you want," you say. "It will be important to show whether the trend is improving, deteriorating, or moderating. Obviously, we want to demonstrate our need for external capital. However, another objective is to make the investor aware of the components of working capital, and how the components have changed over the last 2 years. Right?""Exactly," she says. "Let me know if you have any questions."
For this discussion, complete the following based on your conversation with Mary:
Explain what working capital is.Provide an equation that can be used to compute it.Follow that up by computing the working capital for Apex, using these balance sheets.
Apex PrintingBalance SheetsAs of December 31, 2013 and 2012000$ 000$Assets 2013 2012Cash 6,000 5,700Accounts Receivable 2,350 2,300Inventory 12,100 6,500Total Current Assets 20,450 14,500Land 25,000 20,000Building & Equipment 300,000 300,000Less: Accumulated Depreciation - Building & Equipment (187,850) (160,000)Total Long Term Assets 137,150 160,000Total Assets 157,600 174,500
Liabilities and Stockholders' EquityAccounts Payable 4,600
Mary sees you pass by her office the next day and waves you in to talk.
"Good morning," she says. "I need you to write some content for a report I'm preparing. I could do it myself, but I can't get to it before I have to leave town on business. This piece of the report is fairly straightforward. Given your expertise, I think you'll do a good job with it."
"Sure," you say. "Whatever I can do to help.""Okay, good," she says. "This report is for potential investors. The section I want you to write is about working capital. I'd like you to explain what working capital is and provide an equation that can be used to compute it. Then follow that up by computing the working capital for Apex, using the same balance sheets you have for the PowerPoint presentation you're working on. Make sure to describe the trend."
"I think I understand what you want," you say. "It will be important to show whether the trend is improving, deteriorating, or moderating. Obviously, we want to demonstrate our need for external capital. However, another objective is to make the investor aware of the components of working capital, and how the components have changed over the last 2 years. Right?""Exactly," she says. "Let me know if you have any questions."
For this discussion, complete the following based on your conversation with Mary:
Explain what working capital is.Provide an equation that can be used to compute it.Follow that up by computing the working capital for Apex, using these balance sheets.
Apex PrintingBalance SheetsAs of December 31, 2013 and 2012000$ 000$Assets 2013 2012Cash 6,000 5,700Accounts Receivable 2,350 2,300Inventory 12,100 6,500Total Current Assets 20,450 14,500Land 25,000 20,000Building & Equipment 300,000 300,000Less: Accumulated Depreciation - Building & Equipment (187,850) (160,000)Total Long Term Assets 137,150 160,000Total Assets 157,600 174,500
Liabilities and Stockholders' EquityAccounts Payable 4,600