Question: (a) For the current year, Encor Ltd. had net sales of $450,000 and paid $260,000 for the cost of goods sold. They had average receivables

(a) For the current year, Encor Ltd. had net sales of $450,000 and paid $260,000 for the cost of goods sold. They had average receivables of $130,000, average payables of $57,000, and an average inventory of $90,000. Calculate the Operating cycle and Cash cycle for Encor Ltd. Interpret the results. (7 points)

(b) Prepare a Cash Budget based on the info below for the year 2020 for the months of January, February, March, and April. (8 points)

- Encor Ltd., anticipates sales of $18,000 in January 2020, with anticipated growth of 10% per month;

- Credit sales are paid 50% the same month and 50% the following month (credit sales for December 2019 was $14,000)

- Credit purchases are paid 35% of sales; paid in the month they are incurred

- Wages and expenses are 30% of sales every month; paid in the month they are incurred

- In February, the company pays $27,000 cash for new equipment

- The beginning cash balance is $13,000

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