Question 21 For the year ended 31 March 2021, Manchester Ple had total domestic and foreign credit sales of 40 million. The cost of these credit sales was 20 million. Trade payables are associated with domestic and international suppliers. The current assets and liabilities of Manchester Plc as of March 2021 are summarised as follows: 0000000 Inventory 5.000 Trade Receivable 6,000 Current Assets 11.000 Trade Payables 2.000 Overdrant 14.000 6,000 Current Liabilities Net current assets 5.000 For the year ended 31 March 2022, Manchester Plc predicts that the cost of sales would decline to 60% of sales, and the credit sales would still be at 40 million. The company expects current assets to comprise of inventory and trade receivables, and current liabilities to comprise of trade payables and the company's overdraft. Manchester Plc expects to achieve the following target working capital ratio values for the year ended 31 March 2022 Trade receivables days: 70 Trade payables days: 50 Inventory days: 60 Current ratio: 1.3 times Required: Calculate the working capital cycle of Manchester Plc at the year ended March 202i and discuss whether a working capital cycle should be positive or negative. (8 marks) by Calculate the target quick ratio (acid test ratio) and the target ratio of sales to net working capital of Manchester Ple at the end of March 2022. (7 marks) te Compare the current asset and current liability positions for March 2021 and March 2022 and discuss how the working capital financing policy of Manchester Plc would have changed. (10 marks) Table 2: Annuity of 1 to be received for n periods Periods 1 2 3 4 5 6 7 8 9 10 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 2% 0.980 1.942 2.884 3.808 4.713 5.601 6,472 7.323 8.162 8.983 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8,111 Interest Rate 596 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.329 4.212 5.076 4.917 5.786 5.582 6.463 6.210 7.108 6.802 7.722 7.360 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 9% 0.917 1.759 2.531 3.240 3.890 4.486 5,033 5.535 5.995 6.418 1096 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Periods 1 2 3 4 5 6 7 8 9 10 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 129 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4,833 179 0.855 1.58S 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 1896 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4,339 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 894 Table 1: Present value of l to be invested at the end of the n periods Interest Rate Periods 1% 2% 3% 4% 3% 6% 1 0.990 0.980 0.971 0.962 0.952 0.943 2 0.980 0.961 0.943 0.925 0.907 0.890 3 0.971 0.942 0.915 0.889 0.864 0.840 4 0.961 0.924 0.888 0.855 0.823 0.792 5 0.951 0.906 0.863 0.822 0.784 0.747 6 0.942 0.888 0.837 0.790 0.746 0.705 7 0.933 0.871 0.813 0.760 0.711 0.665 8 0.923 0.853 0.789 0.731 0.677 0.627 9 0.914 0.837 0.766 0.703 0.645 0.592 10 0.905 0.820 0.744 0.676 0.614 0.558 79 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 99 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 Periods 1 2 3 5 6 7 8 9 10 17% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 1296 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 1396 0.885 0.783 0,693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 19% 0,840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162 Question 21 For the year ended 31 March 2021, Manchester Ple had total domestic and foreign credit sales of 40 million. The cost of these credit sales was 20 million. Trade payables are associated with domestic and international suppliers. The current assets and liabilities of Manchester Plc as of March 2021 are summarised as follows: 0000000 Inventory 5.000 Trade Receivable 6,000 Current Assets 11.000 Trade Payables 2.000 Overdrant 14.000 6,000 Current Liabilities Net current assets 5.000 For the year ended 31 March 2022, Manchester Plc predicts that the cost of sales would decline to 60% of sales, and the credit sales would still be at 40 million. The company expects current assets to comprise of inventory and trade receivables, and current liabilities to comprise of trade payables and the company's overdraft. Manchester Plc expects to achieve the following target working capital ratio values for the year ended 31 March 2022 Trade receivables days: 70 Trade payables days: 50 Inventory days: 60 Current ratio: 1.3 times Required: Calculate the working capital cycle of Manchester Plc at the year ended March 202i and discuss whether a working capital cycle should be positive or negative. (8 marks) by Calculate the target quick ratio (acid test ratio) and the target ratio of sales to net working capital of Manchester Ple at the end of March 2022. (7 marks) te Compare the current asset and current liability positions for March 2021 and March 2022 and discuss how the working capital financing policy of Manchester Plc would have changed. (10 marks) Table 2: Annuity of 1 to be received for n periods Periods 1 2 3 4 5 6 7 8 9 10 0.990 1.970 2.941 3.902 4.853 5.795 6.728 7.652 8.566 9.471 2% 0.980 1.942 2.884 3.808 4.713 5.601 6,472 7.323 8.162 8.983 0.971 1.913 2.829 3.717 4.580 5.417 6.230 7.020 7.786 8.530 4% 0.962 1.886 2.775 3.630 4.452 5.242 6.002 6.733 7.435 8,111 Interest Rate 596 0.952 0.943 1.859 1.833 2.723 2.673 3.546 3.465 4.329 4.212 5.076 4.917 5.786 5.582 6.463 6.210 7.108 6.802 7.722 7.360 0.935 1.808 2.624 3.387 4.100 4.767 5.389 5.971 6.515 7.024 8% 0.926 1.783 2.577 3.312 3.993 4.623 5.206 5.747 6.247 6.710 9% 0.917 1.759 2.531 3.240 3.890 4.486 5,033 5.535 5.995 6.418 1096 0.909 1.736 2.487 3.170 3.791 4.355 4.868 5.335 5.759 6.145 Periods 1 2 3 4 5 6 7 8 9 10 0.901 1.713 2.444 3.102 3.696 4.231 4.712 5.146 5.537 5.889 129 0.893 1.690 2.402 3.037 3.605 4.111 4.564 4.968 5.328 5.650 0.885 1.668 2.361 2.974 3.517 3.998 4.423 4.799 5.132 5.426 0.877 1.647 2.322 2.914 3.433 3.889 4.288 4.639 4.946 5.216 0.870 1.626 2.283 2.855 3.352 3.784 4.160 4.487 4.772 5.019 0.862 1.605 2.246 2.798 3.274 3.685 4.039 4.344 4.607 4,833 179 0.855 1.58S 2.210 2.743 3.199 3.589 3.922 4.207 4.451 4.659 1896 0.847 1.566 2.174 2.690 3.127 3.498 3.812 4.078 4.303 4.494 19% 0.840 1.547 2.140 2.639 3.058 3.410 3.706 3.954 4.163 4,339 20% 0.833 1.528 2.106 2.589 2.991 3.326 3.605 3.837 4.031 4.192 894 Table 1: Present value of l to be invested at the end of the n periods Interest Rate Periods 1% 2% 3% 4% 3% 6% 1 0.990 0.980 0.971 0.962 0.952 0.943 2 0.980 0.961 0.943 0.925 0.907 0.890 3 0.971 0.942 0.915 0.889 0.864 0.840 4 0.961 0.924 0.888 0.855 0.823 0.792 5 0.951 0.906 0.863 0.822 0.784 0.747 6 0.942 0.888 0.837 0.790 0.746 0.705 7 0.933 0.871 0.813 0.760 0.711 0.665 8 0.923 0.853 0.789 0.731 0.677 0.627 9 0.914 0.837 0.766 0.703 0.645 0.592 10 0.905 0.820 0.744 0.676 0.614 0.558 79 0.935 0.873 0.816 0.763 0.713 0.666 0.623 0.582 0.544 0.508 0.926 0.857 0.794 0.735 0.681 0.630 0.583 0.540 0.500 0.463 99 0.917 0.842 0.772 0.708 0.650 0.596 0.547 0.502 0.460 0.422 10% 0.909 0.826 0.751 0.683 0.621 0.564 0.513 0.467 0.424 0.386 Periods 1 2 3 5 6 7 8 9 10 17% 0.901 0.812 0.731 0.659 0.593 0.535 0.482 0.434 0.391 0.352 1296 0.893 0.797 0.712 0.636 0.567 0.507 0.452 0.404 0.361 0.322 1396 0.885 0.783 0,693 0.613 0.543 0.480 0.425 0.376 0.333 0.295 14% 0.877 0.769 0.675 0.592 0.519 0.456 0.400 0.351 0.308 0.270 15% 0.870 0.756 0.658 0.572 0.497 0.432 0.376 0.327 0.284 0.247 16% 0.862 0.743 0.641 0.552 0.476 0.410 0.354 0.305 0.263 0.227 17% 0.855 0.731 0.624 0.534 0.456 0.390 0.333 0.285 0.243 0.208 18% 0.847 0.718 0.609 0.516 0.437 0.370 0.314 0.266 0.225 0.191 19% 0,840 0.706 0.593 0.499 0.419 0.352 0.296 0.249 0.209 0.176 20% 0.833 0.694 0.579 0.482 0.402 0.335 0.279 0.233 0.194 0.162