Palaganas, Mckenzie G

BS BA FM 3

CBA-FM-FC –Final Exam( Part 2)

Given:

Required:
In 3-5 sentences, please comment on each of the recommended actions (EXHIBIT 21.5) by
explaining what is the expected or desired impact /result on the working capital. How will each
recommendation improve the working capital of the company?
A. It is anticipated that reversing the engineering change order for Roto-Wash motors until
all of the remaining old stock has been used up will lower the inventory investment in the
 old motors and free up working capital. Additionally, this will aid in production level
optimization, which will enhance inventory control and lessen surplus inventory.

B. Reducing finished products inventory levels and halting Roto-Wash manufacturing for
two months will release working capital. The business may keep costs down by letting
demand catch up to existing inventory levels and avoiding excess inventory.

C. Accounts receivable management will be enhanced by immediately putting Credit

Appliance Stores' credit on hold until the past-due invoice is paid, then imposing a
revised credit limit. Future credit loss risk will be decreased as a result, and an increase in
cash flow will allow the business to release working capital.

D. Accounts payable management will be improved by stopping early payment discounts

until the working capital investment generates enough surplus cash flow to start accepting
them once more. This will lessen the possibility of cash flow problems and guarantee that
the business has enough working capital to fulfill its obligations. By assuring prompt
payment, it will also assist in enhancing the company's connection with suppliers.