It is the middle of December 2022 and Benju Co is looking at working capital management...
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It is the middle of December 2022 and Benju Co is looking at working capital management for January 2023. Forecast financial information at the start of January 2023 is as follows: Inventory P227 500 Trade receivables P204 175 Trade payablesP43 350 Overdraft P120 125 All sales are on credit and they are expected to be P1.75m for 2022. Monthly sales are as follows: November 2022 (actual)P135 438 December 2022 (forecast)P150 000 January 2023 (Forecast) P175 000 Benju Co has a gross profit margin of 40%. Although Benju Co offers 30 days credit, only 60% of customers pay in the month following purchase, while remaining customers take an additional month of credit. Inventory is expected to increase by P2 625 during January 2023. Benju Co Plans to pay 70% of trade payables in January 2023 and defer paying the remaining 30% until the end of February 2022. All suppliers of the company require payment within 30 days. Credit purchase from suppliers during January 2023 are expected to be P125000. Interest of P35 000 is due to be paid in January 2023 on fixed rate bank debt. Operating cash outflows are expected to be P73 250 in January 2023. Benju Co has no cash and relies on its overdraft to finance daily operations. The company has no plans to raise long-term finance during January 2023. Assume that each year has 360 days. Required: (a) (i) Calculate the cash operating cycle of Benju Co at the start of January 2023. (2 marks) (ii) Calculate the overdraft expected at the end of January 2023. (4 marks) (iii) Calculate the current ratios at the start and end of January 2023. (4 marks) (b) Discuss Five techniques that Benju Co could use in managing trade receivables It is the middle of December 2022 and Benju Co is looking at working capital management for January 2023. Forecast financial information at the start of January 2023 is as follows: Inventory P227 500 Trade receivables P204 175 Trade payablesP43 350 Overdraft P120 125 All sales are on credit and they are expected to be P1.75m for 2022. Monthly sales are as follows: November 2022 (actual)P135 438 December 2022 (forecast)P150 000 January 2023 (Forecast) P175 000 Benju Co has a gross profit margin of 40%. Although Benju Co offers 30 days credit, only 60% of customers pay in the month following purchase, while remaining customers take an additional month of credit. Inventory is expected to increase by P2 625 during January 2023. Benju Co Plans to pay 70% of trade payables in January 2023 and defer paying the remaining 30% until the end of February 2022. All suppliers of the company require payment within 30 days. Credit purchase from suppliers during January 2023 are expected to be P125000. Interest of P35 000 is due to be paid in January 2023 on fixed rate bank debt. Operating cash outflows are expected to be P73 250 in January 2023. Benju Co has no cash and relies on its overdraft to finance daily operations. The company has no plans to raise long-term finance during January 2023. Assume that each year has 360 days. Required: (a) (i) Calculate the cash operating cycle of Benju Co at the start of January 2023. (2 marks) (ii) Calculate the overdraft expected at the end of January 2023. (4 marks) (iii) Calculate the current ratios at the start and end of January 2023. (4 marks) (b) Discuss Five techniques that Benju Co could use in managing trade receivables
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a i Cash Operating Cycle Inventory Days Trade Receivables Days Trade Payables Days 227 500175 000 x ... View the full answer
Related Book For
Intermediate Accounting Reporting and Analysis
ISBN: 978-1285453828
2nd edition
Authors: James M. Wahlen, Jefferson P. Jones, Donald Pagach
Posted Date:
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