The owner of a new startup company, GreatIdea LLC, needs a working capital analysis for the coming four quarters to assist with her cash flow concerns. Unlevered Net Income is expected to be zero for the first two quarters and $100,000 in quarter 3 and $300,000 in quarter 4. Accounts payable will be constant at $50,000 per quarter. Accounts receivable will be zero in the first two quarters but then be $75,000 and $200,000 in quarters 3 and 4 respectively. Inventory will start at $100,000 in Quarter 1, grow to $150,000 in quarter 2 and continue at that level for quarters 3 and 4. Some miscellaneous other needs for working capital will be constant at $25,000 in each quarter. She has secured a $250,000 line of credit for working capital. Will it be sufficient assuming that net income can be used to fund this as needed? Justify your answer.
Quarter Q1 Q2 Q3 Q4
Account receivables 0 0 75000 200000
Inventory 100000 150000 ...
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