QUESTION 2 a) Explain why it is important to manage working capital of a company. (5 Marks) b) Fabulous Boutique Ltd is considering changing its credit terms from 5/15 net 30 to 10/7 net 60. At present 70% of its clients make use of the discount. The average collection period is 25 days, sales is $4 000 000 and bad debts losses amount to 3% of debtors. If the new policy is implemented, 60% of the clients will make use of the discount, the average collection period will increase to 35 days, while sales will increase to $5 500 000 in which 10% of the sales will be for cash. Bad debts written off are expected to increase by 1.5%. The gross profit will remain unchanged at 25% of sales. The opportunity cost associated with an investment in working capital is 15% per annum. Required Advice the company (11 Marks)