1.The following information is extracted from the financial records Eta Limited for the year ended December 31,...
Question:
1.The following information is extracted from the financial records Eta Limited for the year ended December 31, 2020.
Sales = Rs. 2520 crores
Cost of Goods Sold = Rs. 2160 Crores
Accounts Receivable as on January 1, 2020 = Rs. 130 crores.
Accounts Receivables as on December 31, 2020 = Rs. 150 crores.
Inventories as on January 1, 2020 = Rs. 106 crores
Inventories as on December 31, 2020 = Rs. 110 crores
Accounts Payable as on January 1, 2020 = Rs. 46 crores
Accounts Payable as on December 31, 2020 = Rs. 50 crores
Working capital investment (in the form of bank borrowings) at the rate of interest of 10% per annum, to finance current working capital requirements = Rs. 90 crores
a.What is the duration of operating cycle of Eta Limted? Interpret the value of the duration of the operating cycle.
b.What is the duration of cash cycle of Eta Limited? Interpret the value of the duration of the cash cycle.
c.If management of Eta Limited decides to reduce the cash cycle to 15 days, what is the expected savings in interest costs? Explain your answer.
1.The following information is extracted from the financial records Eta Limited for the year ended December 31, 2020.
Sales = Rs. 2520 crores
Cost of Goods Sold = Rs. 2160 Crores
Accounts Receivable as on January 1, 2020 = Rs. 130 crores.
Accounts Receivables as on December 31, 2020 = Rs. 150 crores.
Inventories as on January 1, 2020 = Rs. 106 crores
Inventories as on December 31, 2020 = Rs. 110 crores
Accounts Payable as on January 1, 2020 = Rs. 46 crores
Accounts Payable as on December 31, 2020 = Rs. 50 crores
Working capital investment (in the form of bank borrowings) at the rate of interest of 10% per annum, to finance current working capital requirements = Rs. 90 crores
a.What is the duration of operating cycle of Eta Limted? Interpret the value of the duration of the operating cycle.
b.What is the duration of cash cycle of Eta Limited? Interpret the value of the duration of the cash cycle.
c.If management of Eta Limited decides to reduce the cash cycle to 15 days, what is the expected savings in interest costs? Explain your answer.
Accounting Principles
ISBN: 978-1119411482
13th edition
Authors: Jerry J. Weygandt, Paul D. Kimmel, Donald E. Kieso