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Essay / Research Paper Abstract
This 3 page paper explains the meaning of calculations performed by the student on a set of accounts. The paper helps the student understand what is meant by the working capital turnover, the inventory level changes and turnover, accounts receivable turnover period and days to collection and operating cycle.
Page Count:
3 pages (~225 words per page)
File: TS14_TEaccqucal.rtf
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Unformatted sample text from the term paper:
disproportional increase in the working capital, which has resulted in the turnover of the working capital deteriorating, from 5.66 in 2001 to 3 in 2005. The significant year was 2004
where the level of working capital nearly doubles, resulting in the sharp drop in the working capital turnover. 2. Looking at the level of inventory that is held, this shows
us there has been an increase, but this is not significant, changing by 18% in 2004, but other years only smaller increases. This tells us the value has increased as
sales have increased, but if we look at the working capital turnover in the first calculation the increase in current assets is not accounted for by the increase in inventory.
3. This calculation looks at the inventory turnover, how many times the inventory is sold in a year, it is seen as a measure of efficiency. This appear to
indicate that as the sales have increased the turnaround ha s also increased, from a turnover of 2.41 in 2001 up to 3.04 in 2005. This means, theoretically that there
should be less capital times up in the inventory and work in progress, if sales remain constant, however, as they are increasing the inventory has also been increasing. This shows
that there are not outstanding concerns here as this is showing a gradual and constant improvement. However, it may indicate that we need to look at why and how the
working capital has seen such as large increase in level and decrease inefficiency. 4. Days to convert inventory should reflect the inventory turnover if the calculation has been performed correctly.
This shows the periods to convert the inventory as it comes in into sales. The shorter the time period the more efficient a company is, however where this is
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