Question 5 (10 marks) (i) The following information is extracted from the financial statements of XERO Limited: Cash $677,423 Accounts Payable $1,721,669 Accounts Receivable $1,845,113 Notes Payable $2,113,345 Inventories $1,312,478 Total Current Assets $3,835,014 Total Current Liabilities $3,835,014 Net Sales $9,912,332 Cost $5,947,399

(a) Briefly explain what you understand by the term operating cycle. (1 mark) Click or tap here to enter text.

(b) What is the operating cycle for XERO Limited? (1 marks) Click or tap here to enter text.

(c) What can you say about XERO Limiteds accounts receivable and inventory management if it is known that the industry average operating cycle is 72 days? (1 mark)

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(d) Briefly explain what you understand by the cash conversion cycle. (1 mark)

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(e) What is the cash conversion cycle for XERO Limited? (1 mark)

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(f) What can you say about XERO Limiteds cash conversion cycle if it is known that the industry average cash conversion cycle is 42 days? (1 mark)

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(ii) The current ratio and net working capital are good predictors of a firm's ability to meet its short-term obligations. Do you agree or disagree? Provide your rationale. (4 marks)