Polokwane Systems $($Pty$)$ Ltd

Polokwane Systems $($Pty$)$ Ltd is a medium size entity that manufactures and sells electronic gate remotes to retailers for resale and installation. Because of an increase in security risks, the company had to expand to meet the growing demand. Many new players have recently entered the market and customers are in the position to negotiate favourable credit terms. Polokwane Systems $($Pty$)$ Ltd is now reviewing its credit policies, with intentions to change its credit terms currently offered to its customers.

Additional information:

$$ The budgeted turnover for the next year is expected to be R$3240000,$ if the current credit term of one month offered by the company is extended to two months $($this will be a $10\%$ increase from current turnover levels$).$ If the credit term is extended to three months, the turnover will increase to R$3600000.$ Credit term is determined after the invoice date and all sales are on credit.

$$ It is anticipated that bad debts will be $2\%$ of the total turnover for a credit term of one month, $3\%$ for a credit term of two months and $6\%$ for a credit term of three months. The rest of the customers will adhere to the credit terms.

$$ A cash discount of $5\%$ is offered to customers making their payments within $15$ days. Roughly $20\%$ of customers use the discount for early payment. All other customers use normal credit terms. Discount allowed and received are classified as operating expenses and income respectively.

$$ The company marks up its goods by two$-$thirds of cost$.$ The company negotiates and sticks to a credit term of $60$ days with all its suppliers. You can assume there is $365$ days in a year.

$$ The cash operating and administration costs are estimated at R$130000$ per year.

$$ The balances of the working capital accounts for the current year are as follows:

o Bank account: R$200000($opening credit balance$)$

o Trade receivables: R$230000($closing balance$)$

o Trade payables: R$270000($closing balance$)$

$,$

$$ The company currently pays interest on the bank overdraft balance of $8,25\%$ per year. This rate also approximates the company$$s weighted average cost of capital. The company earns an average of $3,5\%$ per annum based on the closing bank balance, if favourable.

Calculate the average debtors$$ time$-$lag for the current year. Round your final answer to two decimal places.

$1.$

$25,91$ days

$2.$

$28,50$ days

$3.$

$32,39$ days

$4.$

$28,79$ days