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Question 2 ( 2 5 marks ) Natural Styles Ltd is a retail company operating 4 0 stores. The company's statement of financial position (
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marks
Natural Styles Ltd is a retail company operating stores. The company's statement of financial
position volance sheet at June recorded the following balances under current assets and
current liabilities:
Currentassets
Cash
$
Accounts receivable
$
Inventory
$
Current liabilities
Accounts payable
$
The company ss able to maintain goad margins owing to the segment that if operates in and to its
policy of being located in popular shopping malls. The sales revenue for the yearending June
was $ and the cost of goods sold amounted to $ The company is able
to borrow on a shortterm basis from its bank at an mterest rate of per year, Interest
compounded on mentily basis.
Required
a What is the company's operating cycle and casti cycle?
b What is the effect on the company's operating cycle if the company decides to take
advantage of the discotint and pays on the day after purchase?Question
marks
Natural Styles Ltd is a retail company operating stores. The company's statement of financial
position balance sheet at June recorded the following balances under current assets and
current liabilities:
Current assets
Current liabilities
Accounts payable $
The company is able to maintain good margins owing to the segment that it operates in and to its
policy of being located in popular shopping malls. The sales revenue for the year ending June
was $ and the cost of goods sold amounted to $ The company is able.
to borrow on a shortterm basis from its bank at an interest rate of per year, interest
compounded on monthly basis.
Required
a What is the company's operating cycle and cash cycle?
b What is the effect on the company's operating cycle if the company decides to take
advantage of the discount and pays on the day after purchase?
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