Question
The following information is provided in respect to the affairs of Pote Limited which prepares its account on the calendar year basis. 1995 Shs. 1994
The following information is provided in respect to the affairs of Pote Limited which prepares its account on the calendar year basis. 1995 Shs. 1994 Shs. Sales Purchases Cost of goods sold Stock at 31 December Debtors at 31 December Creditors at 31 December Total assets at 31 December 600,000 400,000 360,000 100,000 98,000 40,000 300,000 500,000 350,000 330,000 60,000 102,000 25,000 185,000 Stock and debtors at 1 January 1994 amounted to Sh.70,000 and Sh.98,000 respectively. Required: a) Calculate the rate of stock turnover expressed: i) as a ratio; ii) in days, for each of the years 1994 and 1995. b) Calculate the rate of collection of debtors, in days, for each of the years 1994 and 1995. c) Calculate the rate of payment to creditors, in days, for each year 1994 and 1995. d) Show the cash operating cycle for each year. e) Comment on the results.
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