Which of the following firms would be expected to need the most cash to conduct its daily operations?
A) a retail grocery store that sells on a cash only basis
B) an electronics manufacturer that only assemble its goods once they have been paid for
C) an airline that has many of its fares pre-paid by cash or credit card
D) an aircraft manufacturer with large inventory and long development and sales cycles

Question

Quizplus · Accepted Answer

C) Initial value = $57,000 / (0.13 - 0.05) = $712,500,000;
reducing working capital by 10%, starting working capital = 0.9 × 2,000 = 1,800;
final value = $57,200 / (0.13 - 0.05) = $715,000,000;
thus, an increase of $715,000,000 - $712,500,000 = $2,500,000

Which of the Following Firms Would Be Expected to Need