Networking Capital Case Study

1050 Words 5 Pages
PART A:
1. To determine the networking capital in 2012 for the firm provided we need to collect information from the balance sheet. Networking capital is the measurement between the relationship involving current assets and current liabilities. Networking capital is current assets minus current liabilities. According to the balance sheet for 2012, the networking capital can be calculated as follows:
$8,752.00-$6,862.00= $1890.00

2. The networking capital for 2011 (using the same formula: current assets- current liabilities) $10,083.00-$6,486.00=$3597.00
3. The change in NWC decreased from 2011 ($3597.00) to 2012 ($1890.00) $1707.00.
4. To determine the cash flow from assets:
Cash flow= cash flow to creditors + cash flow to owners
In this
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3. If we were to use the same example and change the time of the deposits to the beginning of the year verse the end of the year, in 17 years our new total would be $127,173.85. $11,033.85 more would be earned by making it at the beginning of the year, this increase is due to the money being in longer therefore earning interest longer.
To Solve I have used the simplified equation for solving for the Future Value of an Annuity Due. An annuity due is when payments/deposits are made at the beginning of the time period verse the end.

Continued….
3B.

4B. To solve for the amount received 15 years later, discontinuing deposits while still earning 9.5%, we would use the formula:

Answer: $496,146.13 15 years later

PART C:
1. The correlation coefficient measures the statistical relationships (linear relationship) between two or more securities. They help to show how securities are performing in relation to one another; the possible range for the correlation coefficient is -1 to +1. A positive correlation means two different asset returns are moving in the same direction over time. A negative correlation is just the opposite; they are moving in different directions over time. If the correlation is 0, there is no

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