EMW Company manufactures and distributes clothing. You have been provided with the following estimates for the coming year which have come from the forecast financial statements: 

                                                                                   £’000

Sales                                                                          6,000

Cost of sales                                                             4,500

Receivables                                                              2,400

Finished goods                                                          400

 Work in progress (80% complete)                            550

 Raw materials                                                          200

 Payables                                                                  190

 Material purchases for the year will make up 50% of the cost of sales and the company is expected to have a bank overdraft of £500,000 bearing an annual rate of interest of 7%. The average cost of the company’s long-term finance is 11%. High inflation has lead to the company’s input costs rising significantly over the past year which has deteriorated its profit margin. 

Required:

 a)Calculate the company’s cash operating cycle to the nearest day. 

b)Suggest four methods for reducing the length o the cash operating cycle. 

c)Calculate the working capital requirement the cost of funding the current assets of the company. ) 

d)Discuss the three working capital funding strategies that could be adopted by EMW Co. 

e)Discuss the problems that businesses are likely to experience if there is high inflation. 

Answer rating: 100% (QA)

Modify Immediate payment Yor Accounte RoCirable are easy woy to increase corh flouw ... View the full answer