Wilson Electric Company, a manufacturer of various types of electrical equipment, is examining ,its working capital investment policy for next year. Projected fixed assets and current liabilities are $20 million and $18 million, respectively. Sales and EBIT are partially a function of the company’s investment in working capital—particularly its investment in inventories and receivables. Wilson is considering the following three different working capital investment policies: , ,Working Capital Investment Policy Investment in Current Assest (in Millions of Dollars) Projected Sales (in millions of Dollars) EBIT (in millions of Dollars),Aggressive (small investment in current assets) $28 $59 5.9,Moderate(moderate investment in current assets) 30 60 6.0,Conservative(large investment in current assets) 32 61 6.1, ,a. Determine the following for each of the working capital investment policies: ,Rate of return on total assets (that is, EBIT/total assets) ,ii. Net working capital position ,iii. Current ratio ,b. Describe the profi tability versus risk trade-off s of these three policies ,
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