FINANCIAL MANAGEMENT

Question 1 - Working Capital (10 marks) Buy-Right (Pty) Ltd is a supermarket group trading throughout South Africa, with the following current assets and current liabilities at Dec 2019 Rm 488 273 Current Assets Inventory Accounts Receivable 215 Current Liabilities Short Term Loan Accounts payable Taxation 430 153 177 100 Buy-Right achieved sales of R1316m for 2019. . Purchases (COGS) for 2019 was R1080. Question 1 (a) Calculate the 2019 cash conversion cycle for Buy-Right. Question 1 (b) Assume that Buy-Right decided to improve it's cash conversion cycle by decreasing it's inventory conversion days to 60. The company also outsourced the collection of its accounts receivable book to an independent 3rd party, which resulted in an a new collection period of 30 days. Calculate the ZAR effect of the net cash flow to the company. Question 1 (C) Assume that sales for 2020 is expected to grow at just over 20% to reach R1580m. Assuming that the cash conversion cycle remains constant for 2020, would Buy-right have sufficient working capital to fund the envisaged sales for 2020