facturing Company decides to examine its working capital policy. In addition to its current strategy of maintaining current assets at 50 percent of sales, Five Star is considering two other strategies based on current assets at 30 or 70 percent of next year's sales. Projected net sales and fixed assets for next year are P1,000,000 and P600,000, respectively. Five Star plans to maintain its existing capital structure of 50 percent debt and 50 percent equity. Current liabilities are to be 40 percent of projected total liabilities. Required: c. Calculate Five Star's net working capital and current ratio under each of the three strategies. d. Explain what effect these strategies would have on five Star's liquidity
facturing Company decides to examine its working capital policy. In addition to its current strategy of maintaining current assets at 50 percent of sales, Five Star is considering two other strategies based on current assets at 30 or 70 percent of next year's sales. Projected net sales and fixed assets for next year are P1,000,000 and P600,000, respectively. Five Star plans to maintain its existing capital structure of 50 percent debt and 50 percent equity. Current liabilities are to be 40 percent of projected total liabilities. Required: c. Calculate Five Star's net working capital and current ratio under each of the three strategies. d. Explain what effect these strategies would have on five Star's liquidity
Chapter2: Financial Statements, Cash Flow, And Taxes
Section: Chapter Questions
Problem 15SP
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