In the middle of December 2023 company CorpX is looking at working capital management for January...

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In the middle of December 2023 company CorpX is looking at working capital management for January 2024. Forecast financial information at the start of January 2024 is as follows: Inventory Trade receivables Trade payables Overdraft 455 000 408 350 186 700 240 250 All sales are on credit and they are expected to be $3,5m for 2023. Monthly sales are as follows: November 2023 (actual) December 2023 (forecast) 270 875 300 000 350 000 January 2024 (forecast) CorpX has a gross profit margin of 40%. Although CorpX offers 30 days credit, only 60% of customers pay in the month following purchase, while the remaining customers take an additional month of credit. Inventory is expected to increase by $52,250 during January 2024. CorpX plans to pay 70% of trade payables in January 2024 and defer paying the remaining 30% until the end of February 2024. All suppliers of the company require payment within 30 days. Credit purchases from suppliers during January 2024 are expected to be $250,000. Interest of $70,000 is due to be paid in January 2024 on fixed rate bank debt. Operating cash outflows are expected to be $146,500 in January 2024. CorpX has no cash and relies on its overdraft to finance daily operations. The company has no plans to raise long-term finance during January 2024. (i) Calculate the cash operating cycle of CorpX at the start of January 2024. (ii) Calculate the overdraft expected at the end of January 2024. (iii) Calculate the current ratios at the start and end of January 2024. In the middle of December 2023 company CorpX is looking at working capital management for January 2024. Forecast financial information at the start of January 2024 is as follows: Inventory Trade receivables Trade payables Overdraft 455 000 408 350 186 700 240 250 All sales are on credit and they are expected to be $3,5m for 2023. Monthly sales are as follows: November 2023 (actual) December 2023 (forecast) 270 875 300 000 350 000 January 2024 (forecast) CorpX has a gross profit margin of 40%. Although CorpX offers 30 days credit, only 60% of customers pay in the month following purchase, while the remaining customers take an additional month of credit. Inventory is expected to increase by $52,250 during January 2024. CorpX plans to pay 70% of trade payables in January 2024 and defer paying the remaining 30% until the end of February 2024. All suppliers of the company require payment within 30 days. Credit purchases from suppliers during January 2024 are expected to be $250,000. Interest of $70,000 is due to be paid in January 2024 on fixed rate bank debt. Operating cash outflows are expected to be $146,500 in January 2024. CorpX has no cash and relies on its overdraft to finance daily operations. The company has no plans to raise long-term finance during January 2024. (i) Calculate the cash operating cycle of CorpX at the start of January 2024. (ii) Calculate the overdraft expected at the end of January 2024. (iii) Calculate the current ratios at the start and end of January 2024.

Answer rating: 100% (QA)

i To calculate the cash operating cycle of CorpX at the start of January 2024 we need to consider the time it takes to convert inventory into cash through sales and the time it takes to pay suppliers ... View the full answer