The table below gives information extracted from the annual accounts of Hulk plc for the past...

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The table below gives information extracted from the annual accounts of Hulk plc for the past two years. Hulk plc – Extracts from annual returns 2018 Rs 12,500 2019 Rs 14,500 Inventory- Raw materials -Work in progress 8,200 8,100 -Finished goods 14,100 13,900 Purchases 92,000 114,000 Cost of goods sold 110,000 130,000 Revenue 275,000 315,000 Trade Receivables 16,400 15,000 Trade Payables 24,000 21,000 REQUIRED (a) Calculate the length of the working capital cycle for 2018 and 2019 respectively. [6 Marks] (b) Discuss the main reasons for holding cash. [6 Marks] (c) Hulk Plc sells on credit, the normal credit period being 60 days. The new policy of company is to allow a discount of 2.25% for payment within 7 days. The company operates a bank overdraft at 16% interest per annum. You are required to determine whether to give the discount for Rs100 sales. [4 Marks] (d) Hulk Plc sells 22500 bottles of juice each year. It has been estimated that the cost of holding one bottle for a year is Rs2.50. The cost of placing an order for new inventories is estimated at Rs125. You are required to calculate the EOQ for bottles of juice. [4 Marks] The table below gives information extracted from the annual accounts of Hulk plc for the past two years. Hulk plc – Extracts from annual returns 2018 Rs 12,500 2019 Rs 14,500 Inventory- Raw materials -Work in progress 8,200 8,100 -Finished goods 14,100 13,900 Purchases 92,000 114,000 Cost of goods sold 110,000 130,000 Revenue 275,000 315,000 Trade Receivables 16,400 15,000 Trade Payables 24,000 21,000 REQUIRED (a) Calculate the length of the working capital cycle for 2018 and 2019 respectively. [6 Marks] (b) Discuss the main reasons for holding cash. [6 Marks] (c) Hulk Plc sells on credit, the normal credit period being 60 days. The new policy of company is to allow a discount of 2.25% for payment within 7 days. The company operates a bank overdraft at 16% interest per annum. You are required to determine whether to give the discount for Rs100 sales. [4 Marks] (d) Hulk Plc sells 22500 bottles of juice each year. It has been estimated that the cost of holding one bottle for a year is Rs2.50. The cost of placing an order for new inventories is estimated at Rs125. You are required to calculate the EOQ for bottles of juice. [4 Marks]

Answer rating: 100% (QA)

A 2018 2019 Inventory Days inventorycost of goods sold x 365 34800110000 x 365 36500130000 x 365 115 days 102 days Receivable days receivablesrevenue ... View the full answer