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:

£m Inventories 1.5 Trade receivables 3.8 Trade payables 0.7 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:

Average inventories turnover period 22 Average settlement period for trade receivables 57 Average settlement period for trade payables 55 How much cash could Trader Ltd generate if it were able to bring its ratios into line with those of similar businesses?