You have been tasked to evaluate the financial health and working capital policy of Yoyo Co. The extracts of the balance sheet as at 31 December 2019 and income statement for the year ended are as follows: Balance sheet $'000 Income Statement $'000 Current assets Sales 20,000 Inventory 2,500 Cost of Sales 15,000 Accounts receivables 4,250 Cash 4,000 Current liabilities Accounts payables 2,750 Short-term bank loan 2,500 Companies which are similar to Yoyo Co have the following average metrics for 2019: Inventory days 57 days Accounts receivable days 55 days Accounts payables days 60 days Current ratio 2.4x Quick ratio 1.7x Management is currently reviewing their credit policies in order to attract more customers and improve its operating cycle. The sales manager proposes that for customers who order goods exceeding $100,000, Yoyo Co can extend credit terms of 2/10, net 60. Assume 360 days in a year. (a) Compute the working capital cycle (i.e. cash cycle) of Yoyo Co as at 31 December 2019. (8 marks) (b) Interpret Yoyo Cos cash cycle based on your computations. (3 marks) (c) Analyse the performance metrics of Yoyo Co as compared to its competitors based on the cash cycle and liquidity ratios. (8 marks)

(d) Discuss the circumstances when the cash cycle of a company is positive and when the cash cycle is negative. (6 marks) (e) Calculate the implied interest rate when Yoyo Cos customers do not take up the discount offered to them. (5 marks)