(a) Prichard Ltd, a manufacturing company, are having short term cash flow problems. Their receivables are currently taking, on average, 60 days to pay, but their terms are monthly. The sales director suggests offering a 2% discount to those who pay within the monthly terms to aid cash flow. Critically appraise this suggestion and suggest other possible solutions to the problem.

(b) Gooch Ltd are expecting to have a cash surplus in early 2022 due to better than expected Christmas sales. They are considering expanding the business at some point but have no detailed plans yet. Discuss the options open to Gooch Ltd for the efficient use of the cash surplus.

(c) Dajaku Ltd have a strong negotiating position in that they have many suppliers trying to sell them the various raw materials that they need. They currently exploit this by taking significantly longer to pay those suppliers than the terms offered. Critically appraise the approach taken by Dajaku Ltd making justified suggestions for potential improvements in the management of their payables.

Answer rating: 100% (QA)

Part a Offering a 2 discount to customers who pay within the monthly terms may help to improve Prichard Ltds cash flow by encouraging customers to pay sooner However it is important to consider the po... View the full answer