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Find what will be the decrease in working capital

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Albinoni Ltd sells a single product and has annual sales of $200,000 per year. Inventories are held at a constant level and each product is sold at a mark-up of 25%. The average settlement period for trade receivables is 2 months and for trade payables it is 1 month. However, the business is considering changing these periods to 1.5 months and 3 months respectively. These changes are not expected to have any effect on the level of sales or inventories.

Problem 1: What will be the decrease in working capital if the proposed changes are implemented?

Reference no: EM132698899

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