Town Mills Ltd is a wholesale business. Extracts from the business’s most recent financial statements are as follows:

Required:

(a) Calculate the average operating cash cycle (in days) during the year ended 31 May and explain to what use this value can be put and what limitations it has.

(b) Discuss whether there is evidence that the business has a liquidity problem.

(c) Explain the types of risk and cost that might be reduced by following the finance director’s proposal to reduce inventories levels.