Question 1b

You have just been appointed as the financial controller of Sanchez & Gomez Limited, a privately owned entity operating in the fashion wholesale business. You have been asked to attend the forthcoming monthly management meeting and report on aspects of the entitys financial position. You are aware that during the previous financial year the management team has been concerned about the liquidity of the company, and its working capital management.

The following information is available from the management accounts for the year ended 30 December 2015

		6 months to 30 June2014 000	6 months to 30 Dec 2014 000
Inventories at period end		1050	550
Receivables at period end		1100	950
Cash and cash equivalents at period end		------	150
Trade payables at period end		1400	800
Short term borrowings at period end		250	--------
Revenue for the period		2250	2000
Cost of sales for the period		1500	1300

Prepare a brief report that analyses the working capital and liquidity position of Sanchez & Gomez limited. Include the below calculations for the relevant ratios, in your report and comment (20)

HINT: Inventory turnover, Creditors payment period, Debtors collection period, Acid test ratio, Current ratio, Working capital, Cash conversion cycle