QUESTION 1 (Cash management)

You are provided with the following information relating to ABC Sdn Bhd.

Inventory RM 2,100,000

Account Receivables RM 2,550,000

Accout Payable RM 800,000

Sales RM 30,000,000

Cost of Goods Sold RM 17,500,000

Required:

a)Calculate the Cash conversion cycle.[10 marks]

b)Based on your answer in(a), how much cashABC needs to prepare (standby) for inventory? (Assume 360 days a year).[5 marks]

c)Briefly explain any two ways for ABC reduce their Cash Conversion Cycle.[5 marks]