Question
Alpha Power COGS and sales for FY19-20 are Rs. 16 Crores and Rs. 21 Crores, respectively. The average accounts payable and accounts receivable for the
Alpha Power COGS and sales for FY19-20 are Rs. 16 Crores and Rs. 21 Crores, respectively. The average accounts payable and accounts receivable for the period are Rs. 50 lakhs and Rs. 70 lakhs, respectively.
Assuming, suppliers enforced "3/10, net 40" credit terms for Alpha Power and subsequently Alpha Power imposed "2/10, net 30" credit terms for consumers. Assuming 40% payments are made on day 10 and remainder on the last day of the credit period, in both the cases.
a) Calculate operating profit margin
b) Calculate receivable days and payable days.
c) Calculate change in working capital requirement for Alpha Power.
d) Compare and comment on cost of credits for suppliers and that of Alpha Power.
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