Arctic Delight's managers have been particularly concerned with the business's liquidity position in recent months. The...

 

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Arctic Delight's managers have been particularly concerned with the business's liquidity position in recent months. The most up-to-date Statement of Profit or Loss and Statement of Financial Position of the business are as follows: Statement of Profit or Loss for the Financial Year Ended 31 December 2019 RM'000 Revenue Cost of sales Gross profit Expenses Loss for the year RM'000 452 (323) 129 (132) (3) Statement of Financial Position as at 31 December 2019 RM'000 RM'000 Assets Property, Plant and equipment 357 Current assets Inventories Trade Receivables TOTAL ASSETS Equity & Liabilities Equity 143 163 306 663 Capital 100 Retained earnings 158 258 Non-current liabilities Borrowings - loans 120 Current liabilities Account Payables Overdraft TOTAL EQUITY & LIABILITIES 145 140 285 663 The trade receivables and payables were maintained at a constant level throughout the year. Required: (a) Calculate the followings: i. Current ratio ii. Acid-test ratio/Quick ratio iii. Inventory turnover iv. Inventory conversion period (days) V. Average collection period (days) vi. Account payable deferral period (days) vii. Operating cycle (days) viii. Cash conversion cycle (days) (b) Based on your answer in part (a) above, explain why Arctic Delight should concern about its liquidity position. (c) Suggest any TWO (2) steps can be taken to improve the Cash conversion cycle of the business Arctic Delight's managers have been particularly concerned with the business's liquidity position in recent months. The most up-to-date Statement of Profit or Loss and Statement of Financial Position of the business are as follows: Statement of Profit or Loss for the Financial Year Ended 31 December 2019 RM'000 Revenue Cost of sales Gross profit Expenses Loss for the year RM'000 452 (323) 129 (132) (3) Statement of Financial Position as at 31 December 2019 RM'000 RM'000 Assets Property, Plant and equipment 357 Current assets Inventories Trade Receivables TOTAL ASSETS Equity & Liabilities Equity 143 163 306 663 Capital 100 Retained earnings 158 258 Non-current liabilities Borrowings - loans 120 Current liabilities Account Payables Overdraft TOTAL EQUITY & LIABILITIES 145 140 285 663 The trade receivables and payables were maintained at a constant level throughout the year. Required: (a) Calculate the followings: i. Current ratio ii. Acid-test ratio/Quick ratio iii. Inventory turnover iv. Inventory conversion period (days) V. Average collection period (days) vi. Account payable deferral period (days) vii. Operating cycle (days) viii. Cash conversion cycle (days) (b) Based on your answer in part (a) above, explain why Arctic Delight should concern about its liquidity position. (c) Suggest any TWO (2) steps can be taken to improve the Cash conversion cycle of the business

Answer rating: 100% (QA)

Answer a Calculations i Current Ratio Current Assets Current Liabilities Inventories Trade Receivabl... View the full answer