You have been given the following information for XYZ (Pty) Ltd: Balance Sheet Income Statement 2022 2023
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Question:
You have been given the following information for XYZ (Pty) Ltd:
Balance Sheet | Income Statement | |||||||||
2022 | 2023 | 2022 | 2023 | |||||||
R' 000 | R' 000 | R' 000 | R' 000 | |||||||
Non-current assets (carrying value) | 250 | 270 | Revenue | 305 | 320 | |||||
Current assets: | 91 | 92 | Opening inventory | 47 | 45 | |||||
Inventory | 44 | 42 | Purchases | 184 | 180 | |||||
Receivables | 38 | 43 | 231 | 225 | ||||||
Bank | 9 | 7 | Closing inventory | 35 | 45 | |||||
Total Assets | 341 | 362 | Cost of sales | 196 | 180 | |||||
Gross profit | 109 | 140 | ||||||||
Equity and liabilities | Finance costs | 4.2 | 5.3 | |||||||
Ordinary share capital (R0.50 shares) | 75 | 75 | Depreciation | 10 | 10 | |||||
Share premium account | 37 | 37 | Sundry expenses | 24 | 27 | |||||
Revaluation reserve | 20 | 0 | Operating expenses | 38 | 42 | |||||
Profit and loss account | 35 | 45 | Operating profit | 71 | 98 | |||||
167 | 157 | Taxation | 10 | 10 | ||||||
Profit after tax | 61 | 88 | ||||||||
Non-current liabilities | Dividends | 12 | 17 | |||||||
5% secured loan notes | 84 | 105 | Ordinary shares | 10 | 15 | |||||
8% Preference shares (R1 shares) | 25 | 25 | Preference shares | 2 | 2 | |||||
Retained profit | 49 | 71 | ||||||||
Current liabilities: | ||||||||||
Trade payables | 55 | 65 | ||||||||
Taxation | 10 | 10 | ||||||||
Total equity and liabilities | 341 | 362 | ||||||||
Current Ratio | 1.4 | 1.2 | ||||||||
Quick Ratio | 0.7 | 0.7 | ||||||||
2022 | ||||||||||
Inventory Holding Period | 65 | 91 | ||||||||
Receivables days | 45 | 49 | ||||||||
Payables days | 109 | 132 | ||||||||
Cash operating Cycle | 2 | 8 |
Assuming all sales were on credit, calculate the length of the cash operating cycle in 2023 and, with reference to the 2022 figures provided, comment on the working capital efficiency of the company. (10 Marks)
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