QUESTION $2$

$[20$ marks$]$

The following information was extracted from the financial statements of NCD Ltd for the year ended $30$ June $20\mathrm{.}2$:

$\backslash$table$[[$Sales $(30\%$ for cash$),$R$1700000],[$Cost of goods sold,$1360000],[$Purchases $($all on credit$),965000],[$Accounts receivable,$125000],[$Accounts payable,$114000],[$Inventory $(1$ July $20\mathrm{.}1),622000]]$

REQUIRED:

$2\mathrm{.}1$ Calculate the following:

$($i$)$ Average age of inventory

$($ii$)$ Average collection period

$($ii$)$ Average payments period

$(2)$

$2\mathrm{.}2$ Illustrate the cash conversion cycle $($CCC$)$ of NCD Ltd graphically. Ensure that the graphic representation includes at least details of the following:

Average age of inventory $($AAI$)$

Average collection period $($ACP$)$

Average payments period $($APP$)$

Cash conversion cycle $($CCC$)$

Operating cycle $($OC$)$

$2\mathrm{.}3$ How would you advise the management of NCD Ltd to improve their cash conversion cycle? Focus specifically on advice dealing with the accounts payable of the company.