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Final Application Project

These net cash investments include 50 million to the

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Unformatted text preview: is ultimately used to fund the company’s operations, including the purchase of more raw materials, returning to the beginning of the working capital cycle. The assets calculated into the working capital cycle for Cooper Tire & Rubber Company includes cash, accounts receivable, inventory, and other current assets. In this case, the liabilities calculated in the working capital cycle are accounts payable, accrued liabilities, notes payable, income taxes payable and current portion of long- term debt. However, notes payable and current portion of long- term debt are not included in the calculation of current operating liabilities due to that fact that they are interest- bearing liabilities. Certain assets and liabilities are not included in the working capital cycle because they do not directly impact the manufacturing of the products at hand. For instance, good will and pension benefits are not included in the working capital cycle. Goodwill is an intangible asset that is recorded so the company can accurately represent its value and liquidity. Clearly it has no impact on the production of goods. As for pension benefits, considering those employees retired have no impact on the production of goods yet the liability still needs to be accounted for. Furthermore, pension benefits are considered a long- term liability. We see that net operating working capital has increase by 12% from 2011 to 2012. It is clear that there was a major jump in current assets whereas current liabilities barely changed. Looking deeper into current assets, it is clear that the increase had a...
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