You are a Finance Officer working at Tebogo Co$,$ a company that manufactures and distributes

clothing. You have estimated the following figures for the coming year:

Sales P$5,600,000$

Average receivables P$506,000$

Gross profit margin $25\%$ on sales

Average inventories

Finished goods P$350,000$

Work in progress P$550,000$

Raw materials P$220,000$

Average payables P$210,000$

Material costs represent $50\%$ of the total cost of sales.

Tebogo Co imports most of its materials from overseas countries, especially China. The high

inflation rates in China have meant that the company's cost of materials has risen rapidly over

recent years. This has led to a significant deterioration in the company's margins, which,

coupled with its increasing liquidity problems, is making the shareholders nervous.

Required

$($a$)$ Calculate the cash operating cycle, to the nearest day. $(6$ marks$)$

$($b$)$ Suggest four methods of reducing the length of the cash operating cycle. $(4$ marks$)$

$($c$)$ Discuss:

$($i$)$ The significance of trade payables in a firm's working capital cycle; and $(4$ marks$)$

$($ii$)$ The dangers of over$-$reliance on trade credit as a source of finance. $(4$ marks$)$

$($d$)$ Explain the general problems associated with inflation.