Answer Happy

1. Working Capital Let us suppose that we are running a food truck business selling hamburgers. We have bought the truck equipped with the necessary cooking equipment and are now ready to start our business. Our expectation for monthly sales is 640,000 yen. In order to achieve this sales, the cost of ingredients (raw material) would be 128,000 yen. Since we are a startup and have no track record, the supplier insists on paying for the ingredients when we order. Under this assumption, if we order one month's supply of ingredients, we would need 128000 yen to pay the bill, which is essentially our cost Meanwhile, if we reduce the order to 1/2 month's supply, the money required would be 64000 yen, which shows the effect of changes in to the amount of money we must commit. If the supplier changes mind and gives us credit and allows us to pay one month after delivery, we would not need to commit money, because our monthly revenues would be sufficient to pay the bill. This shows that an increase in would reduce the levels of money required to keep a business running. On the other hand, even if the supplier gives us credit, if we start a "eat now, pay later" plan and, as a result, receive payments from every one of our customers one month after we sold hamburgers we would again need yen to keep our business running, because there will not be enough money at the time we are required to pay the supplier. This shows the effect of an increase in