Question 1 Carrom Co is a wholesale business. Summaries of its most recent income statement and statement of financial position are as follows: Income statement for the year ended 31 December 2020 RM4000 Sales revenue 1,806 Cost of sales (1.304) Gross profit 502 Other operating expenses (218) Operating profit 284 Interest (22) Profit before taxation 262 Taxation (76) Profit for the year 186 Statement of financial position as at 31 December 2020 RM000 Assets Non-current assets at cost 1,428 Accumulated depreciation (590) 838 Current assets Inventories Receivables 404 788 Total assets 1,626 384 EQUITY AND LIABILITIES Equity Ordinary share capital 400 Retained earnings 492 892 Current liabilities Payables 520 Bank overdraft 214 734 380 473 Total equity and liabilities 1626 As at 31 December 2019: Inventories Receivables 367 Payables The finance director believes that inventories levels are too high and that they should be reduced Most of Carrom Co's customers are given credit period of 60 days. Currently, no discounts are given to customers who pay on time or earlier. Number of days of Carrom Co during year ended 31 December 2019 Inventories holding period 95 Trade receivables period 60 Trade payables period During year ended 31 December 2019: Current ratio of Carrom Co: 1.36:1 ratio Acid test ratio of Carrom Co 0.90:1 ratio Number of days of the industry during year ended 31 December 2020: Inventories holding period 90 Trade receivables period 50 Trade payables period 141 During year ended 31 December 2019: Current ratio of industry: 1.30: 1 ratio Acid test ratio of industry 1.10: 1 ratio 140 Required (a) Calculate Carrom Co's operating cash cycle (in days) during year ended 31 December 2020 (4 marks) (b) What would be the increase/ decrease in operating cash cycle (in days) and in investment in working capital, if trade receivables period and trade payable period, both has increased by 1 day during the year ended 31 December 2020