Personal Protective Equipment (PPE) is a wholesaler that buys and sells a variety of cleaning products and sells them to companies for commercial use. As part of its business, PPE purchases inventory, on account. PPE's suppliers invoice them the same day the items are delivered to the PPE warehouse. PPE’s policy is to pay any invoices within 10 days of receiving the inventory. It takes PPE approximately 2O days to re-sell products. When a sale is made, PPE delivers the product and invoices the company the same day. Receivables are collected, on average, within 50 days from the date the products are delivered to their customers. In recent months, the company has been short on cash, and has had to use their line of credit to pay expenses.

Required:

1. Identify the parts of the cash to cash cycle. Calculate of the length of the cash to cash cycle.

2. Explain why PPE Ltd is having cash flow problems, using your calculations above.

3. Compare and contrast how accrual accounting and the cash basis of accounting would result in a different result in the financial statements. In your response, specifically discuss the impact on revenue and expenses.

Answer rating: 100% (QA)

a The cash to cash cycle is an accounting technique used to assess the firms financial requirements ... View the full answer