dolution
Consider the following figures extracted from the books of Ndendeule Co. Limited, a manufacturing company with operations in the Zombwe province of Zambia.
Items :
Sales
Cost of Goods Sold
Purchases
Operating Profit
Inventory
TradeReceivables
Cash at Hand
Trade Payables
Bank Overdraft
K’000 :
250,000,
120,000
150,000
80,000
25,000
33,000
15,000
20,000
10,000
respectively to the items.
Assume that all Purchases are on credit terms while 20% of Sales are on a cash basis. The sector average working capital cycle is 80 days. Consider 365 days as the working calendar. Required a. Calculate the Five (5) working capital rations from the figures above b. Determine the company’s working capital cycle and compare with the sector average. c. Briefly explain specific strategies or measures a firm can put in place to improve its working capital cycle.
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