Question $2$

$(25$ marks$)$

Natural Styles Ltd is a retail company operating $40$ stores. The company's statement of financial

position $(1$volance sheet$)$ at $30$ June $2013$ recorded the following balances under current assets and

current liabilities:

Currentassets

Cash

$$4200000$

Accounts receivable

$$9600000$

Inventory

$$15000000$

Current liabilities

Accounts payable

$$13500000$

The company ss able to maintain goad margins owing to the segment that if operates in and to its

policy of being located in popular shopping malls. The sales revenue for the yearending $30$ June

$2013$ was $$144000000$ and the cost of goods sold amounted to $$54\mathrm{.}720000.$ The company is able

to borrow on a short$-$term basis from its bank at an mterest rate of $9\mathrm{.}6\%$ per year, Interest

compounded on mentily basis.

Required

a$)$ What is the company's operating cycle and casti cycle?

b$).$ What is the effect on the company's operating cycle if the company decides to take

advantage of the discotint and pays on the ${10}^{th}$ day after purchase?Question $2$

$(25$ marks$)$

Natural Styles Ltd is a retail company operating $40$ stores. The company's statement of financial

position $($balance sheet$)$ at $30$ June $2013$ recorded the following balances under current assets and

current liabilities:

Current assets

Current liabilities

Accounts payable $$13500000$

The company is able to maintain good margins owing to the segment that it operates in and to its

policy of being located in popular shopping malls. The sales revenue for the year ending $30$ June

$2013$ was $$144000000$ and the cost of goods sold amounted to $$54720000.$ The company is able.

to borrow on a short$-$term basis from its bank at an interest rate of $9\mathrm{.}6\%$ per year, interest

compounded on monthly basis.

Required

a$)$ What is the company's operating cycle and cash cycle?

b$)$ What is the effect on the company's operating cycle if the company decides to take

advantage of the discount and pays on the ${10}^{th}$ day after purchase?