5b

(b) Given two companies as follows: Spring Sdn. Bhd.: This company collects its accounts receivable in 50 days. On average the company keeps its inventories for 20 days. It will pay its accounts payable in 25 days. Summer Sdn. Bhd.: This company has inventory turnover of 20 times. The company gives trade credit of 2/10 net 30. Its customers always take advantage of the flexible credit term. The company will always try to delay paying its accounts payable up to 28 days. Assume there are 360 days in a year. Required: Compare the two companies and determine the company that manages its cash more efficiently. Show the relevant calculations to support your answer. (10) (Total: 20)