Question: Mary Pascal is having some problems with her cash flow

Mary Pascal is having some problems with her cash flow. She asks her accountant to find a way to generate more cash from her working capital. The accountant says that if Mary were to manage her trade receivables and inventories more efficiently, she would be able to improve her cash flow performance. With the following information, calculate how much cash Mary could generate within the next four months if she were able to improve her average collection period to 35 days and the inventory turnover to six times.
Revenue ............ $2,500,000
Cost of sales ........... 1,700,000
Trade receivables ......... 300,000
Inventories ............ 400,000

Mary could generate $176,952 if both trade receivables and inventories turnover ratios could be improved to 35 days and 6 times respectively.

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  • CreatedDecember 03, 2014
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