A. What is the liquidity position of the company? Support your answer with relevantratios B. What is the Cash Conversion Cycle for the company? Assume a 360-day year. C. Explain what is meant when a business activity has high operating gearing, andwhat are the implications for a business with high operating gearing? Presto Berhad has been particularly concerned with its liquidity position in recentmonths. The most recent income statement and balance sheet of the business areas follows:Income Statement for the year ended 30 September 2022RM000Sales revenueLess Cost of SalesOpening inventoriesAdd PurchasesLess Closing InventoriesGross ProfitExpensesNet loss for the periodNon-current assetsFreehold premisesFixtures and Fittings (CarryingAmount)Motor Vehicles (Carrying AmountCurrent AssetsInventoriesReceivablesBalance Sheet as at 30 September 2022Less Current LiabilitiesTrade payablesBank overdraftWorking CapitalLess Non-Current LiabilitiesLoansEquityOrdinary Share CapitalRetained Profit125341466(143)143163306145140(285)RM000452(323)129(132)280255235721378(120)258100158258The receivables and payables were maintained at a constant level throughout theyear.

A. Liquidity position of the company based on ratio CURRENT RATIO Current Assets / Current…

A. What is the liquidity position of the company? Support your answer with relevant ratios B. What is the Cash Conversion Cycle for the company? Assume a 360-day year. C. Explain what is meant when a business activity has high operating gearing, and what are the implications for a business with high operating gearing?

A. What is the liquidity position of the company? Support your answer with relevant ratios B. What is the Cash Conversion Cycle for the company? Assume a 360-day year. C. Explain what is meant when a business activity has high operating gearing, and what are the implications for a business with high operating gearing?

EBK CONTEMPORARY FINANCIAL MANAGEMENT

14th Edition

ISBN:9781337514835

Author:MOYER

Publisher:MOYER

Chapter16: Working Capital Policy And Short-term Financing

Section: Chapter Questions

Problem 3P

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