Use the information for the question(s)below. Azamel Cosmetics specializes in cosmetics which have high levels of UV protection.The above figures show the anticipated sales over the next four quarters.Azamel carries inventory equal to 30% of next quarter's sales,has accounts payable of 20% of next quarter's sales,and accounts receivable of 25% of this quarter's sales.
-If its net income is 12% of sales,in which quarter(s)is it expected that Azamel's seasonal working capital needs will be the smallest?

Question

Use the information for the question(s)below.  Azamel Cosmetics specializes in cosmetics which have high levels of UV protection.The above figures show the anticipated sales over the next four quarters.Azamel carries inventory equal to 30% of next quarter's sales,has accounts payable of 20% of next quarter's sales,and accounts receivable of 25% of this quarter's sales.
-If its net income is 12% of sales,in which quarter(s)is it expected that Azamel's seasonal working capital needs will be the smallest?

Quizplus · Accepted Answer

Azamel's seasonal working capital needs will be the smallest in Q1 because the company carries inventory worth 30% of next quarter's sales, and sales in Q1 are the lowest. Therefore, the inventory carrying costs will also be lower. Additionally, accounts receivable are only 25% of the current quarter's sales, which is Q4. Q1 accounts payable will also be lower since it is only 20% of next quarter's sales. With lower expenses, Azamel's net income will be higher, resulting in a lower need for working capital.

Use the Information for the Question(s)below