Question 3

Consider the following financial information for Applet Ltd for the year ending December 31 2022.

Items	1 January	31 December
Inventory	$6200	6620
Accounts Receivable	11 836	13 200
Accounts Payable	9 200	10 200
Other infromation
Net Sales	90 000
Cost of goods sold	55 400
Net Purchases	56 000

The firm has a current annual outlay of $4 320 000 on operating cycle investments.

The firm currently pays 10% for its negotiated financing ( assume a 360 day operating year)

Required:

Calculate:

i.) the firms cash conversion cycle. [2 marks]

ii.) the firms operating cycle. [1 mark]

iii.) the daily expenditure and the firms annual savings if the operating cycle is reduced by

15 days. [2 marks]

Question 4

Discount Policy. The Stillwell Company presents the following information:

Current annual credit sales: $36,000,000

Collection period: 2 months

Terms: net/40

Rate of return: 18%

The company is considering offering a 5/10, net/40 discount. It anticipates that 50 percent of

its customers will take advantage of the discount. The collection period is expected to decrease to 1 month.

Required : Evaluate whether or not the discount policy be implemented?