Trader Ltd is a wholesaler of imported washing machines. The business is partly funded by a bank overdraft and the bank is putting pressure on Trader Ltd to reduce this as soon as possible.

Sales revenue is £14.6 million a year and is all on credit. Purchases and cost of sales are roughly equal at £7.3 million a year. Current investment in the relevant working capital elements are:

Trader Ltd’s accountant believes that much of the overdraft could be eliminated through better control of working capital. As a result, she has investigated several successful businesses that are similar to Trader Ltd and found the following averages:

How much cash could Trader Ltd generate if it were able to bring its ratios into line with those of similar businesses?

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Inventories Trade receivables Trade payables m 1.5 3.8 0.7