Growth of Working Capital Ratio Analysis
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Please describe the financial situation in the excel chart and the changes from year to another year using the percentages in the chart.
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Solution Summary
This case deals with a firm which has issues in forecasting sales, then extending this forecast to provide an accurate view of the progress (or lack thereof) of the company.
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Here are the incremental changes from year to year:
Note that in the first year, we have a series of negative returns (if averaged for the year by quarter).
* From year 1 to year 2, there is an increase in cash by + 2.06
* From year 2 to year 3, cash decreases by 1.12%
* From year 3 to year 4, cash decreases by .57%
* From year 4 to year 5, cash again decreases by .34%
All of the above indicates that as working capital grows, cash spending increases more than the growth of the working capital, ...
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