QUESTION 1: Calculate the Cash Conversion Cycle (CCC) for each of the two companies in 2019 and 2020. Using your answer, analyze the efficiency of each of the two companies in managing their working capital in 2020 as compared to 2019. Note: Ensure that you analyze this question, not just describe the CCC values. (3 marks)

	AUSTAL 2019	AUSTAL 2020	SYNLAIT MILK 2019	SYNLAIT MILK 2020
INVENTORIES	167,042,000	143,799,000	157,765,336	250,310,351
COST OF GOODS SOLD	1,661,113,000	1,846,707,000	778,722,364	984,427,613
ACOGS	4,550,994.52	5,059,471.23	2,133,485.93	2,697,061.95
RECEIVABLES	225,268,000	144,217,000	59,271,700	58,592,269
SALES	1,851,021,000	2,086,001,000	980,289,979	1,209,835,532
AVG DAILY SALES	5,071,290.41	5,715,071.23	2,685,725.97	3,314,617.90
PAYABLES	202,308,000	156,910,000	206,737,486	221,863,965
INVENTORY DAYS	36.70450475	28.42174476	73.94721187	92.80852844
ACCOUNTS RECEIVABLE DAYS	44.42025239	25.23450612	22.06915399	17.67693014
ACCOUNTS PAYABLE DAYS	44.45358022	31.01312228	96.9012653	82.26135285
CCC	36.67117692	22.6431286	-0.88489944	28.22410573

Austral

Holding less inventory in 2020 compared to 2019, therefore, decreasing the cash conversion cycle

COGS have increased from $1,661,113,000 to $1,846,707,000 , however, the inventory has decreased from $167,042,000 to $143,799,000 meaning that theyve been managing their inventory somewhat well enough to decrease their inventory days. In addition, increasing their productivity evident by the increase of COGS

The payables have also decreased meaning that they have been able to pay off some of their creditors

Austral has been able to receive their money from buyers evident in their receivable values

SYNLAIT MILK

Synlait Milk has a negative CCC in 2019 meaning that the company received cash from its sales before it paid its suppliers for the products it sold.

However, in 2020, while the Avg daily COGS increased from 157,765,336 in 2019, the inventories and accounts receivables increased as well. They werent able to manage their inventories as well which might have resulted in a higher CCC in 2019

Accounts payable days reduced from 96.9 days in 2019 to 82.26 days in 2019 which might suggest it is not taking full advantage of opportunities to delay payment to suppliers.

QUESTION 2: Analyse the sources of finance for each of the two companies in 2020 as compared to 2019. Use two capital structure ratios to support your answer and provide an explanation regarding the changes in the composition of the sources of finance for each enterprise. Note: Ensure that you analyze this question, not just describe the ratio values. (2 marks) (PLEASE SOLVE QUESTION 2)