1. The Greek Connection had sales of $32.0 million and a cost of goods sold of $12.

8 million in
2009. A simplified balance sheet for the firm appears below:
THE GREEK CONNECTION
Balance Sheet as of December 31, 2009 (thousands of dollars)
Liabilities and Equity

Assets

Cash
Accounts receivable
Inventory
Total current assets
Net plant, property, and equipment
Total assets

1,682
3,929
1,129
6,740
8,500
15,240

Accounts payable
$1 comma 5741,574
Notes payable
1 comma 0001,000
Accruals
1 comma 2201,220
Total current liabilities
$3 comma 7943,794
Long-term debt
$3 comma 0003,000
Total liabilities
$6 comma 7946,794
Common equity
$8 comma 4468,446
Total liabilities and equity
$15 comma 24015,240
a. Calculate The Greek Connection's net working capital in 2009.
b. Calculate the cash conversion cycle of The Greek Connection in 2009.
c. The industry average accounts receivable days is 30 days. What would the cash conversion cycle for
The Greek Connection have been in 2009 had it matched the industry average for accounts
receivable days?
a. Calculate The Greek Connection's net working capital in 2009.
The net working capital is _____$ (Round to the nearest dollar.)

2. Assume the credit terms offered to your firm by your suppliers are 2.6/5, Net
30. Calculate the cost of the trade credit if your firm does not take the
discount and pays on day 30.The effective annual cost of the trade credit
is_____%. (Round to two decimal places.)
3. Your supplier offers terms of 1.3/99, Net 45. What is the effective annual cost
of trade credit if you choose to forgo the discount and pay on day 45? The
effective annual cost of the trade credit is _______%. (Round to two decimal
places.)
4. The Fast Reader Company supplies bulletin board services to numerous hotel
chains nationwide. The owner of the firm is investigating the benefit of
employing a billing firm to do her billing and collections. Because the billing
firm specializes in these services, collection float will be reduced by 18 days.
Average daily collections are $1,250, and the owner can earn 8% annually
(expressed as an APR with monthly compounding) on her investments. If the
billing firm charges $350 per month, should the owner employ the billing
firm? The benefits are $_______. (Round to the nearest dollar.)

5. Sailboats Etc. is a retail company specializing in sailboats and other sailing-related equipment.
The following table contains financial forecasts as well as current(month 0) working capital levels.
During which months are the firm's seasonal working capital needs the greatest? When does it
have surplus cash?
($000)
0
1
2
3
4
5
6
Net Income
$10.37
$11.55 $14.83 $24.66 $30.39 $18.17
Depreciation
1.95
3.09
3.06
3.91
5.08
3.91
Capital Expenditures
1.19
0.00
0.00
1.16
0.00
0.00
Levels of Working Capital
AccountsReceivable
$1.98 $2.93
$3.92
$5.08 $7.02
$10.07 $5.99
Inventory
3.07 2.06
3.94
4.99
5.02
3.92
2.01

Accounts Payable
2.05 2.07
2.06
2.04
2.02
2.09
1.95
To determine Sailboats seasonal working capital needs, we calculate the changes in net working capital
for the firm:(Round to two decimal places.)

Month
(000)
Change in accounts receivable
Change in inventory
Change in accounts payable
Change in net working capital
6. Quarterly working capital levels for your firm for the next year
are included in the following table. What are the permanent
working capital needs of your company? What are the
temporary needs?
Quarter
(000)
1
2
3
4
Cash
$100
$100
$100
$100
AccountsReceivable
198
105
101
604
Inventory
197
497
898
47
Accounts Payable
99
96
102
96
What are the permanent working capital needs of your company? The
permanent working capital needs of your company are $_____.
(Round to nearest dollar.)

7. Hand-to-Mouth is currently cash-constrained, and must

make a decision about whether to delay paying one of its
suppliers, or taking out a loan. They owe the supplier
$10,500, but the supplier will give them a 2.2% discount
if they pay by today (when the discount period expires).
That is, they can either pay $10,269 today, or $10,500 in
one month when the net invoice is due. Because Hand-toMouth does not have the $10,269 in cash right now, it is
considering three options:
Alternative A: Forgo the discount on its trade credit
agreement, wait and pay the full $10,500 in one month.
Alternative B: Borrow the money from Bank A, which has
offered to lend the firm $10,269 for one month at an APR
(compounded monthly) of 12%. The bank will require a (nointerest) compensating balance of 4.7% of the face value of
the loan and will charge a $90 loan origination fee, which
means Hand-to-Mouth must borrow even more than the
$10,269.
Alternative C: Borrow the money from Bank B, which has
offered to lend the firm $10,269 for one month at an APR of
14.8% (compounded monthly). The loan has a 1.3% loan
origination fee. Alternative A:The effective annual cost is ____

1
$
$
$
$

%. (Round to two decimal places.)

8.

please look up the balance sheet for Amazon and give us

your opinion on their working capital management skills.
Also please tell us what industry traditions accommodate
the company's working capital arrangement with suppliers.