1,Describe the components of working capital, and indicate the importance of this calculation 2,What considerations should a company make in deciding whether to sell on credit as opposed to requiring cash payment when a sale is made 3,What is the operating cash cycle (OCC) for a retailer, and why is it important for the management and control of cash 4,How might each of the following affect a businesss level of inventory an increase in the number of production bottlenecks a rise in the level of interest rates a decision to offer customers a narrower range of products in the future a switch from an overseas supplier to a local one a deterioration in the quality and reliability of bought in components Tariq, the credit manager of Heltex Ltd, is concerned that the pattern of monthly sales receipts shows that credit collection is poor compared to budget The sales director believes that Tariq is to blame for this, but Tariq insists he is not Why might Tariq not be to blame for the deterioration in the credit collection period Complete the table below by indicating no effect, increase or decrease for each transaction 5, Firm 1 Firm 2 Firm 3 Sales revenue $820 $5,000 $5,000 Cost of sales $544 $3,200 $3,200 Opening inventories $142 $600 $650 Closing inventories $166 $500 $850 Purchases $568 $3,100 $3,400 Opening accounts receivable $264 $1,100 $1,100 Closing accounts receivable $264 $1,250 $1,000 Opening accounts payable $159 $1,000 $500 Closing accounts payable $159 $800 $600 Description Effect on current assets Effect on current liabilities Effect on working capital Transaction 1 $1,000 cash purchase of inventory Transaction 2 $1,500 credit purchase of inventory Transaction 3 $20,000 loan obtained from bank Transaction 4 Collect $500 accounts receivable Transaction 5 Paid $800 accounts payable Purchased $20,000 of equipment on Transaction 6 30 day note payable Purchased $50,000 truck with 60 Transaction 7 day note payable Transaction 8 Payment of bank loan Transaction 9 Provision of services for cash Transaction 10 Provision of services on credit Description Effect on current assets Effect on current liabilities Effect on working capital Transaction 1 $1,000 cash purchase of inventory Transaction 2 $1,500 credit purchase of inventory Transaction 3 $20,000 loan obtained from bank Transaction 4 Collect $500 accounts receivable Transaction 5 Paid $800 accounts payable Purchased $20,000 of equipment on Transaction 6 30 day note payable Purchased $50,000 truck with 60 Transaction 7 day note payable Transaction 8 Payment of bank loan Transaction 9 Provision of services for cash Transaction 10 Provision of services on credit

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1,Describe the components of working capital, and indicate the importance of this calculation. 2,What considerations should a company make in deciding whether to sell on

1,Describe the components of working capital, and indicate the importance of this calculation.

2,What considerations should a company make in deciding whether to sell on credit as opposed to requiring cash payment when a sale is made?

3,What is the operating cash cycle (OCC) for a retailer, and why is it important for the management and control of cash?

4,How might each of the following affect a businesss level of inventory?

an increase in the number of production bottlenecks
a rise in the level of interest rates
a decision to offer customers a narrower range of products in the future
a switch from an overseas supplier to a local one
a deterioration in the quality and reliability of bought-in components.

Tariq, the credit manager of Heltex Ltd, is concerned that the pattern of monthly sales receipts shows that credit collection is poor compared to budget. The sales director believes that Tariq is to blame for this, but Tariq insists he is not. Why might Tariq not be to blame for the deterioration in the credit collection period?

Complete the table below by indicating no effect, increase or decrease for each transaction.

image text in transcribed

	Firm 1	Firm 2	Firm 3
Sales revenue	$820	$5,000	$5,000
Cost of sales	$544	$3,200	$3,200
Opening inventories	$142	$600	$650
Closing inventories	$166	$500	$850
Purchases	$568	$3,100	$3,400
Opening accounts receivable	$264	$1,100	$1,100
Closing accounts receivable	$264	$1,250	$1,000
Opening accounts payable	$159	$1,000	$500
Closing accounts payable	$159	$800	$600

Description Effect on current assets Effect on current liabilities Effect on working capital ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? Transaction 1 $1,000 cash purchase of inventory Transaction 2 $1,500 credit purchase of inventory Transaction 3 $20,000 loan obtained from bank Transaction 4 Collect $500 accounts receivable Transaction 5 Paid $800 accounts payable Purchased $20,000 of equipment on Transaction 6 30-day note payable Purchased $50,000 truck with 60- Transaction 7 day note payable Transaction 8 Payment of bank loan Transaction 9 Provision of services for cash Transaction 10 Provision of services on credit ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? Description Effect on current assets Effect on current liabilities Effect on working capital ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? ????? Transaction 1 $1,000 cash purchase of inventory Transaction 2 $1,500 credit purchase of inventory Transaction 3 $20,000 loan obtained from bank Transaction 4 Collect $500 accounts receivable Transaction 5 Paid $800 accounts payable Purchased $20,000 of equipment on Transaction 6 30-day note payable Purchased $50,000 truck with 60- Transaction 7 day note payable Transaction 8 Payment of bank loan Transaction 9 Provision of services for cash Transaction 10 Provision of services on credit