The following information was extracted from the books of XYZ ltd for the financial year 2017 and 2018 respectively

2017 2018

Stock of raw materials 30,000 40,000

Work in progress 10,000 18,000

Finished goods stock 130,000 170,000

Debtors 230,000 2,300,000

Annual sales 1,000,500 1,050,000

Cost of production 110,000 100,000

Trade creditors 300,000 400,000

Annual purchase of raw materials 700,000 770,000

Required:
i. Compute the working capital cycle (10 marks)
ii. Suggest the ways in which the cycle can be reduced (4 marks)
b) Explain three dangers of building excessive working capital (6 marks)