Modern Kitchens specializes on sell prefabricated kitchens. The company has stores in all major capital cities throughout Australia.

Modern Kitchens specializes on sell prefabricated kitchens. The company has stores in all major capital cities throughout Australia. It's been established since 2001 and has seen tremendous growth but more recently has seen several overseas competitors enter the Australian market resulting in an increase in competition. This increased competition has placed significant pressure on containing costs and drawn management's attention to a review of working capital practices. Detailed below are relevant figures and ratios to assist you in evaluating Modern Kitchen's working capital management.

Working Capital Ratios            2016               2017               2018               2019

Accounts Receivable Days       14.0 days        18.1 days        23.1 days        31.9 days

Inventory Days                        16.0 days        19.1 days        21.9 days        25.0 days        

Accounts Payable Days            14.1 days        21. days          29.0 days        37.0 days

Note: Ratios are based on assuming end year figures are the average throughout the majority of the year

Extracts from Financial Statements

Cash on hand                          0.20 mill         0.15 mill         .01 mill           (.003 mill)

Sales - all on credit                  8.1 mill           6.9 mill           8.0 mill           9.0 mill

Accounts Receivable Balance   0.3069 mill      0.3453 mill      0.5044 mill      0.7894 mill

Inventory                                0.1754 mill      0.2186 mill      0.2712 mill      0.3219 mill

Cost of Goods Sold                  4.0 mill           4.2 mill           4.5 mill           4.7 mill

Accounts Payable                    0.1534 mill      0.2417 mill      0.3574 mill      0.4762mill

Budgeted Figures                    

Cash on hand                          0.3 mill           0.3 mill           0.31 mill         0.32 mill

Accounts Receivable Balance   0.30 mill         0.31 mill         0.37 mill         0.38 mill

Inventory Balance                    0.16 mill         0.17 mill         0.20 mill         0.21 mill

Accounts Payable                    0.16 mill         0.17 mill         .19 mill           0.20 mill

Accounts Receivable Terms     14 days           14 days           14 days           14 days 

Accounts Payable Terms          30 days           30 days           30 days           30 days

Industry Averages

Accounts Receivable Days       14 days           14 days           15 days           16 days

Inventory Days                        15 days           16 days           16 days           15 days

Accounts Payable Days            30 days           28 days           25 days           20 days