| Course | GF520 Corporate Finance |
|---|---|
| Unit | Unit 9 |
| Paper type | Working capital plan |
| Length | About 980 words, 6 pages double-spaced |
| Format | APA 7 student paper |
| School | Purdue University Global |
| Program | MS in Finance |
| Updated | October 2026 |
Free sample paper for GF520 Unit 9
Twenty-Nine Days Out of the Cash Cycle: A Unit 9 Working Capital Plan for a Lawn and Garden Maker
[Student Name]
Purdue University Global
GF520: Corporate Finance
Unit 9 Working Capital Plan
[Instructor Name]
[Date]
The company, its customers and every figure are composite and illustrative; the article and textbooks cited are real.
The Problem
The company makes hose reels, spreaders, planters and garden carts, sold mainly through two national home improvement chains and about 600 independent garden centers. It is profitable, with sales of $120 million and cost of goods sold of $78 million, but its sales are highly seasonal. It builds inventory from December through March, ships most of it from March through June and collects from customers between May and August. Every spring it borrows more than its $7 million revolving credit line allows, and for the last two years it has asked its bank for a temporary increase.
Diagnosis: Days Between Paying and Being Paid
The cash conversion cycle counts the days from paying suppliers to collecting from customers.
1. Days inventory outstanding: inventory equals 95 days of cost of goods sold.
2. Days sales outstanding: customers pay in an average of 58 days.
3. Days payables outstanding: suppliers are paid in an average of 32 days.
The cycle is 95 plus 58 minus 32, or 121 days. For four months of every year, the company has paid for materials and labor but not yet been paid by customers, and it finances that gap with the credit line. Research on manufacturing firms finds that shorter cash cycles are associated with higher profitability, partly because less capital is tied up and partly because inventory and receivables carry their own costs (Deloof, 2003).
The Monthly Cash Budget
A month-by-month budget for the coming season shows borrowing of about $2.1 million in January, $4.6 million in February, $7.8 million in March and a peak of $9.4 million in April, before falling to $6.9 million in May, $3.2 million in June and zero by August. The April peak exceeds the line by $2.4 million. The plan's aim is to bring the peak comfortably inside the line without new borrowing.
Lever 1: Postpone Final Packaging
Most inventory sits as finished goods in retail packaging, much of it labeled for a particular retail chain. If products are held unpackaged and packed only when orders arrive, the company needs fewer finished units on hand in each version. The operations team estimates that inventory days can fall from 95 to 80.
Cash released: 15 days of cost of goods sold, 15 divided by 365 times $78 million, or about $3.2 million.
Cost: a packing cell near the shipping dock, about $250,000, and slightly longer order lead times in peak weeks.
Lever 2: Tighter Terms for the Two Largest Accounts
The two home improvement chains account for about 55 percent of sales and pay in about 70 days, well beyond the stated sixty-day terms. Independent garden centers pay in about 43 days. Enforcing sixty-day terms with the chains, and offering them a small allowance in exchange for electronic payment on the due date, would bring overall collection to about 50 days.
Cash released: eight days of sales, 8 divided by 365 times $120 million, or about $2.6 million.
Cost: an allowance of about 0.25 percent on the chains' purchases, roughly $165,000 a year, and some negotiating risk with customers whose business the company needs.
Lever 3: Pay Suppliers on Their Terms, Not Early
Many suppliers are paid well before their due dates simply because the accounts payable team runs payments weekly. Moving payments to the due date on accounts that offer no discount would raise payables days from 32 to 38.
Cash released: six days of cost of goods sold, about $1.3 million.
Cost: none, provided payments are on time.
The Discounts That Must Still Be Taken
Several resin and steel suppliers offer 2/10 net 30, so a buyer settling inside ten days may deduct 2 percent, and otherwise the whole invoice falls due at day thirty. Skipping the deduction amounts to borrowing $98 for twenty days at a charge of $2. Over a year of such twenty-day periods that works out near 37 percent, far above the roughly 8 percent the company pays on its credit line. Those suppliers should always be paid on day ten (Brealey et al., 2023).
Stretching every supplier would have looked like the quickest source of cash, but on the accounts offering 2/10 net 30 it would be the most expensive borrowing the company could arrange, so the plan stretches only where stretching costs nothing.
Results
The three levers shorten the cycle from 121 days to 80 plus 50 minus 38, or 92 days, a reduction of 29 days, and release about $7.1 million in total. Rerunning the monthly budget with the new inventory, collection and payment patterns lowers peak April borrowing from $9.4 million to about $3.0 million, inside the $7 million line with room to spare. Interest savings at 8 percent on the lower average balance come to roughly $300,000 a year, more than covering the allowance to the chains.
Risks and Monitoring
The main risk is customer reaction: the chains may resist enforced terms or demand a larger allowance. A second is a weather shock, such as a cold, wet spring, which would leave more inventory unsold whatever the packaging approach. Credit terms are part of what a customer buys, so changing them can change how much the customer orders (Ross et al., 2022). Each metric will be reported monthly against its target, with the chains' payment days reviewed after the first quarter.
Recommendation
Approve all three levers, keep taking every discount on 2/10 net 30 accounts, and present the revised cash budget to the bank before the season so the temporary line increase is no longer needed.
References
Brealey, R. A., Myers, S. C., & Allen, F. (2023). Principles of corporate finance (14th ed.). McGraw Hill.
Deloof, M. (2003). Does working capital management affect profitability of Belgian firms? Journal of Business Finance & Accounting, 30(3-4), 573-588. https://doi.org/10.1111/1468-5957.00008
Ross, S. A., Westerfield, R. W., Jaffe, J., & Jordan, B. D. (2022). Corporate finance (13th ed.). McGraw Hill.
The Purdue Global GF520 Unit 9 instructions
The ninth GF520 unit asks for a working capital plan that solves a cash problem. Diagnose it first with the cash conversion cycle, computing inventory, receivable and payable days from the case figures. Build a monthly cash budget, because the problem is usually a peak that annual ratios hide. Then size each lever separately in days and dollars: inventory practices, customer terms and supplier payments, with the cost of each. Identify any lever that looks attractive but should not be pulled, such as stretching suppliers who offer an early-payment discount, and show the annualized cost that rules it out. Recompute the cycle and the peak borrowing with all levers in place. Address customer and supplier reactions and set monthly measures. Recommend specific actions. Cite research on working capital and the textbook in APA 7.
How the GF 520 Unit 9 example is put together
The plan opens with the company's products, customers and seasonal pattern, then computes the 121-day cycle and cites Deloof's evidence linking shorter cycles to profitability. A monthly budget section lists borrowing from January through August. Each of three levers has its own section with days, dollars released and cost, including a $250,000 packing cell and an allowance of about $165,000 to the chains. A section on 2/10 net 30 terms shows why those suppliers stay on day-ten payment, and the highlighted line calls stretching those accounts the dearest borrowing on offer. Results show a 92-day cycle, about $7.1 million released and peak borrowing near $3.0 million. Risks cite Ross and colleagues on credit terms as part of the product, and the plan closes with what to show the bank.
Reading the GF520 Unit 9 grading rubric
GF520 working capital plans are graded on diagnosis, sizing and judgment. Correct calculation of each component of the cycle earns the first share of points. A monthly cash budget showing the peak is expected, since an annual average cannot explain why the credit line is breached. Each lever must be sized in both days and dollars, with its cost, for full credit. The analytical high point is recognizing a lever that should not be used and supporting that with the annualized cost of a forgone discount. Recomputing the cycle and peak borrowing shows the plan solves the stated problem. Attention to customer and supplier reactions earns credit for realism, and specific recommendations with Deloof, Brealey and Ross listed in APA 7 round off this MS in Finance unit.
GF520 Unit 9 help: mistakes that cost points
A common GF520 Unit 9 error is computing the cash conversion cycle correctly and then proposing every lever at its maximum, without cost. Stretching all suppliers, including those offering discounts, is the most expensive version of that mistake. Others use annual averages and never show the seasonal peak that causes the problem. Receivable and inventory days are computed on the wrong base, sales against cost of goods. Customer reactions to tighter terms are ignored. Results are stated as a shorter cycle without checking whether peak borrowing now fits within the line. Whatever the business in your case, keep the plan in order: diagnose the cycle, budget by month, size and cost each lever, reject the costly ones and confirm the peak is solved.
Get a GF520 Unit 9 example written to your instructions
For your GF520 Unit 9 plan, forward the case's balance sheets, income statement and any monthly sales pattern, with the prompt and rubric. A cash budget by month comes back alongside three sized levers, their side effects and a rerun of the peak month. A first custom sample costs you nothing; delivery normally takes 24-48h. The paper above is an original model document written by our desk, not a submitted student paper and not an official Purdue University Global document.
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GF520 Unit 9 questions, answered
Is taking the early-payment discount always right?
When the firm can borrow for less than the discount's implied rate, yes. Forgoing a 2/10 net 30 discount is equivalent to borrowing for twenty days at an annualized cost near 37 percent, far above most credit lines. The sample takes every such discount and funds it from the revolver. A firm with no access to credit faces a different choice, and the plan would say so.
Should receivable days use sales or credit sales?
Credit sales, where the case separates them, since cash sales never create a receivable. Many cases give total sales only, and the sample then uses total sales and notes the assumption. For inventory and payable days, cost of goods sold is the better base, because both balances are recorded at cost rather than at selling price.
Why build a monthly budget when the prompt only asks for ratios?
Because the ratios describe an average and the problem is usually a peak. A seasonal firm can have an acceptable annual cycle and still breach its credit line for six weeks. If your prompt asks only for ratios, the custom version can confine itself to them, but the sample shows why graders often reward the monthly view when it is offered.
Where can I find a free GF520 Unit 9 sample paper?
This page carries a full GF520 Unit 9 working capital plan for a seasonal lawn-and-garden maker, with the cash conversion cycle, a monthly budget, three sized levers, the discount rule and APA 7 references.
Why not stretch every supplier to raise cash?
Suppliers offering 2/10 net 30 effectively charge about 37 percent a year for paying on day thirty instead of day ten. Borrowing on the credit line at about 8 percent is far cheaper, so those invoices should be paid early.