10 Cash cycle. Set out below are extracts from the accounts of the Petersen Clothing Company for the current and previous financial years.

Current Year £m Previous Year £m Sales 124 96 Cost of sales 74 57 Purchases 78 59 Stocks 11 7 Trade debtors 15 8 Trade creditors 15 10 Stock at the beginning of the previous year was £5m.

(a) Calculate for each year to the nearest whole number:

(i) the company’s operating cycle;

(ii) the company’s cash cycle;

(iii) the approximate amount of net financing required to cover the cash cycle.

(b) Discuss your findings in

(a) above.

(c) Suggest ways in which Petersen might be able to reduce its cash cycle.