Question: Question 3 (10 marks) (a) The summarized current assets and current liabilities of ABC Ltd as at follows: Current assets Cash and marketable securities Accounts

Question 3 (10 marks) (a) The summarized current assets and current

Question 3 (10 marks) (a) The summarized current assets and current liabilities of ABC Ltd as at follows: Current assets Cash and marketable securities Accounts receivable Inventory Total current assets AUD 50,000 75,000 67,000 192,000 Current liabilities Accounts payable Bank loan Accruals Total current liabilities 48,000 66,000 15,000 121,000 Sales for the firm amount to AUD800,000 and cost of goods sold is 45% of sales. The payable deferral period is 48 days. The firm's annual working capital investment is AUD600,000. The firm's required return on investment is 9%. Assume a 360-day year. Required: (i) What is the firm's operating cycle? (2 marks) (ii) What is the firm's cash conversion cycle? (2 marks) (iii) What is the firm's annual savings per cycle if the cash conversion cycle is reduced by 12 days? (2 marks)

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