A small scale industry sector company AJ Pvt Ltd has been concerned with its liquidity position in recent months. The most recent income statement items and statement of financial position of the business are as above: The trade receivables and payables were maintained at a constant level throughout the year. Required: (a) Explain why this firm is concerned about its liquidity position (b) Calculate the operating cash cycle for this firm (c) What steps may be taken to improve the operating cash cycle of the business

Income statement items for the year ended 31 December last year Particulars Rs. 000 Revenue 452 Opening inventories 125 Purchases 341 Closing inventories 143 Overheads 132 Statement of financial position as at 31 December last year Assets Equity and liabilities Rs. 000 Particulars Particulars Rs. 000 plant and 357 Share capital 100 Property, equipment Inventories 143 Retained earnings 158 Trade receivables 163 Long term loans 120 Trade payables 145 Short term loans 140 The trade receivables and payables were maintained at a constant level throughout the year