The working capital (or operating) cycle which requires financing is the length of time between payment for materials entering into inventory and receipt of the proceeds of sales. The following table gives information extracted from the annual accounts of Anchor Ltd for the past three years:

202120222023 $'000$'000$'000Inventory raw material108 000145 000180 000work in progress75 60097 20093 360finish goods86 400129 600142 875purchases - raw material518 400702 000720 000cost of goods sold756 000972 0001 098 360sales revenue864 0001 080 0001 188 000trade receivables172 800259 200297 000trade creditors 86 400105 300126 000

Required:

4.1 The Chief Executive Officer requested you to calculate the working capital cycle year by year, given that the firm use 365 days in the year; and (15)

4.2 To suggest three (3) possible actions that management could take to reduce the length of that cycle, fully illustrate the disadvantages of each options suggested. (10)

(Hint: Your response should be formal, and you must explain what the results of the calculations of 4.1 mean before you could offer suggestions. Each suggestion must be fully motivated.)