Question
The following financial information relates to XYZ Company: Inventory: The company practises just-in-time inventory management and carries a negligible amount of inventory. Account receivable turnover
The following financial information relates to XYZ Company:
Inventory: The company practises just-in-time inventory management and carries a negligible amount of inventory.
Account receivable turnover = 6 times
Account payable turnover = 4 times
For simplicity, we assume that a year consists of 360 days.
(i) Calculate the operating and cash cycle for XYZ Company.
(6 marks)
(ii) Evaluate the implications of the cash cycle for XYZ's working capital management.
(4 marks)
(c) You borrow $5,000 and have to pay $5,300 six months later. Calculate the effective annual rate of this loan.
(5 marks)
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