The Financial Director of Abcam Ltd has been given the objective of improving the liquidity position. Their most recent Income Statement and Statement of Financial Position is as follows:

Income Statement for the Year Ended 31 October 2020

2019 2020

Sales 8,230,000 5,670,000

Less: Cost of sales

Opening inventory 1,570,000 490,000

Add purchases 1,230,000 2,470,000

2,800,000 2,960,000

Less: Closing inventory (490,000) (890,000)

(2,310,000) (2,070,000)

5,920,000 3,600,000

Expenses (2,152,000) (3,360,000)

Net profit/loss for the period 3,768,000 (240,000)

Statement of Financial Position as at 31 October 2020

2019 2020

Fixed assets

Freehold premises at valuation 14,520,000 12,780,000

Fixtures and fittings NBV 5,622,000 4,955,000

Motor vehicles at NBV 3,741,000 2,650,000

23,883,000 20,385,000

Current assets

Inventory 490,000 890,000

Accounts receivable 542,000 941,000

1,032,000 1,831,000

Less creditors due within one year

Accounts payable (271,000) (855,000)

Overdraft _ - (250,000)

(761,000) (726,000)

23,122,000 21,111,000

Less creditors due after more than one year

Corporate debt _ - _(710,000)

23,122,000 20,401,000

Capital and reserves

Ordinary share capital 22,000,000 22,000,000

Retained profit/loss 1,122,000 (1,599,000)

23,122,000 20,401,000

(c) Calculate the operating cash cycle for Abcam for the two years and what steps may be taken to improve it.

(6 Marks)

(d) Interpret the dynamics of working capital management providing your own illustrative example of both aggressive, moderate and relaxed working capital styles.

Please solve C And D parts