The table below gives information extracted from the annual accounts of Hulk plc for

the past two years. Hulk plc Extracts from annual returns

2018 2019

Rs Rs

Inventory- Raw materials 12,500 14,500

-Work in progress 8,200 8,100

-Finished goods 14,100 13,900

Purchases 92,000 114,000

Cost of goods sold 110,000 130,000

Revenue 275,000 315,000

Trade Receivables 16,400 15,000

Trade Payables 24,000 21,000

REQUIRED

(a) Calculate the length of the working capital cycle for 2018 and 2019 respectively.

(b) Discuss the main reasons for holding cash.

(c) Hulk Plc sells on credit, the normal credit period being 60 days. The new policy

of company is to allow a discount of 2.25% for payment within 7 days. The

company operates a bank overdraft at 16% interest per annum. You are required

to determine whether to give the discount for Rs100 sales.

(d) Hulk Plc sells 22500 bottles of juice each year. It has been estimated that the

cost of holding one bottle for a year is Rs2.50. The cost of placing an order for

new inventories is estimated