The following information is extracted from a recent year's financial records of a company which makes a single product: Sales 486,500 Production cost of sales 328,450 Purchase of raw materials 256,250 Stocks: raw materials 49,150 work-in-progress 23.400 finished goods 58,500 Trade debtors 106,640 Trade creditors 35,120 Bank overdraft 21,960 All sales and purchases were made on credit. Assume that 1 year = 365 days. %3! REQUIRED (a) Calculate for the year, the: (i) current and acid-test (quick) ratios (each rounded to 1 decimal place) (i) working capital cycle (rounded to whole days) (iii) Advise the company on what steps may be taken to reduce its working capital cycle.
The following information is extracted from a recent year's financial records of a company which makes a single product: Sales 486,500 Production cost of sales 328,450 Purchase of raw materials 256,250 Stocks: raw materials 49,150 work-in-progress 23.400 finished goods 58,500 Trade debtors 106,640 Trade creditors 35,120 Bank overdraft 21,960 All sales and purchases were made on credit. Assume that 1 year = 365 days. %3! REQUIRED (a) Calculate for the year, the: (i) current and acid-test (quick) ratios (each rounded to 1 decimal place) (i) working capital cycle (rounded to whole days) (iii) Advise the company on what steps may be taken to reduce its working capital cycle.
Managerial Accounting: The Cornerstone of Business Decision-Making
7th Edition
ISBN:9781337115773
Author:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Publisher:Maryanne M. Mowen, Don R. Hansen, Dan L. Heitger
Chapter15: Financial Statement Analysis
Section: Chapter Questions
Problem 56P: The following selected information is taken from the financial statements of Arnn Company for its...
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Transcribed Image Text:The following information is extracted from a recent year's financial records of a company
which makes a single product:
Sales
486,500
Production cost of sales
328,450
Purchase of raw materials
256,250
Stocks: raw materials
49,150
work-in-progress
23.400
finished goods
58,500
Trade debtors
106,640
Trade creditors
35,120
Bank overdraft
21,960
All sales and purchases were made on credit. Assume that 1 year = 365 days.
%3!
REQUIRED
(a) Calculate for the year, the:
(i) current and acid-test (quick) ratios (each rounded to 1 decimal place)
(ii) working capital cycle (rounded to whole days)
(iii) Advise the company on what steps may be taken to reduce its working capital cycle.
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