Year-end balances: A/R $30, Inventory $50, A/P $20. Q1 revenue is $90 at an 80% gross margin. DSO is 90, DIO is 45, DPO is 60. A/R is driven off revenue, Inventory and A/P off COGS, and there are 90 days in the quarter. How much did cash change from working capital?

Question

IBPrep · Accepted Answer

Cash decreased by $27.

COGS = $90 x 20% = $18.

Year-end balances: A/R $30, Inventory $50, A/P $20. Q1 revenue is $90 at an 80% gross margin. DSO is 90, DIO is 45, DPO is 60. A/R is driven off revenue, Inventory and A/P off COGS, and there are 90 days in the quarter. How much did cash change from working capital?

Answer

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Year-end balances: A/R $30, Inventory