Question 8 (10 marks)

The following information is extracted from the financial statements of XP Sports Limited:

Cash	$677,423	Accounts Payable	$1,721,669
Accounts Receivable	$1,845,113	Notes Payable	$2,113,345
Inventories	$1,312,478
Total Current Assets	$3,835,014	Total Current Liabilities	$3,835,014
Net Sales	$9,912,332
Cost	$5,947,399

1. Briefly explain what you understand by the term operating cycle. (2 marks)

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2. What is the operating cycle for XP Sports Limited? (2 marks)

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3. What can you say about XP Sports accounts receivable and inventory management if it is known that the industry average operating cycle is 72 days? (1 mark)

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4. Briefly explain what you understand by the cash conversion cycle. (2 marks)

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5. What is the cash conversion cycle for XP Sports Limited? (2 marks)

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6. What can you say about XP Sports cash conversion cycle if it is known that the industry average cash conversion cycle is 42 days? (1 mark)