Question
QUESTION 1 [25 MARKS] Use the given information about XYZ Pty Ltd to answer the questions that follow: Sales P10, 000,000 Average inventories P2, 000,000
QUESTION 1 [25 MARKS] Use the given information about XYZ Pty Ltd to answer the questions that follow: Sales P10, 000,000 Average inventories P2, 000,000 Cost of goods sold P8, 000,000 Receivables P666, 667 Average Accounts payable P666, 667
Required:
a. Define the cash conversion cycle. (2 marks)
b. Calculate XYZs Average Age of Inventory. (4 marks)
c. Calculate XYZs Average Collection Period. (4 marks)
d. Calculate the Accounts Payable Period. (4 marks)
e. Calculate the XYZs cash conversion cycle. (4 marks)
f. Advise XYZ on what they should do to reduce their cash conversion cycle. (3 marks)
g. Explain two strategies that XYZ can use to fund its cash conversion cycle requirements. (4 marks)
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