QUESTION THREE (a) Cash is no different from any other asset-'If it is not being to result in lower profits. it is not being utilized properly, it is going a iscuss the statement, in particular referring to the motives for holding ca (10 marks) mited are spread evenly over each of (b) The K14 million annual sales receipts of Malik Limited are spread h week is that the SU weeks of the working year However the pattern within each week is a daily rate of receipts on Mondays and Tuesdays is twice that experience Wednesdays, Thursdays and Fridays. Receipts for the whole week are usually hanked on the Friday of each week but this practice is being re-considered. It is suggested that banking should be carried out either daily or twice a week on Tuesday and Friday. The incremental cash cost to Malik of each banking is K40. Malik always operates on bank overdraft and the current overdraft rate is 14% p.a. - this interest charge is applied by the bank on a simple daily basis. Advise Malik on the best policy amongst the three alternatives for banking receipts. Indicate the annual amount by which Malik will be worse off if it pursues the worst, rather than the best, of the three policies for banking receipts. Ignore taxation. (15 marks) Total (25 marks) QUESTION THREE (a) Cash is no different from any other asset-'If it is not being to result in lower profits. it is not being utilized properly, it is going a iscuss the statement, in particular referring to the motives for holding ca (10 marks) mited are spread evenly over each of (b) The K14 million annual sales receipts of Malik Limited are spread h week is that the SU weeks of the working year However the pattern within each week is a daily rate of receipts on Mondays and Tuesdays is twice that experience Wednesdays, Thursdays and Fridays. Receipts for the whole week are usually hanked on the Friday of each week but this practice is being re-considered. It is suggested that banking should be carried out either daily or twice a week on Tuesday and Friday. The incremental cash cost to Malik of each banking is K40. Malik always operates on bank overdraft and the current overdraft rate is 14% p.a. - this interest charge is applied by the bank on a simple daily basis. Advise Malik on the best policy amongst the three alternatives for banking receipts. Indicate the annual amount by which Malik will be worse off if it pursues the worst, rather than the best, of the three policies for banking receipts. Ignore taxation. (15 marks) Total (25 marks)