TMM Limited is a company operating in North-Western Province of Zambia. The company deals in mining and

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Question:

TMM Limited is a company operating in North-Western Province of Zambia. The company deals in mining and agricultural equipment. The following is an extract of the company's current assets and current liabilities as at 31 December, 2022.

Inventory K250, 000

Accounts receivables K 500,000

Cash K350, 000

Accounts payables K250, 000

Sales K 3,000,000

Purchases K3, 000,000

The company's operating expenses per month are assumed to be constant and are composed of the following:

Salaries and wages K2, 500,000

Factory expenses K1, 500,000

Stationery and meetings K500, 000

Travel expenses K 600,000

Loan interest K850, 500

Forecasted sales for year 2017 for the month of July 2018 are K5, 200,000.

The company policy is to sale 80% on credit and balance on cash basis. Disbursement of cash shall done as follows: 60% of cash available to operations and the remaining cash to payables.

The options available to the financial manager to finance short fall of funds in the short-term are:

Treasury bills with domination of K5, 000,000 and K2, 000,000 with Discount rate of 25% and number of days to maturity 270 days.

Commercial paper

Face value of K5, 000,000, rate of interest of 25% and maturity period of 90 days

Short-term loan

Rate of interest of 25%, maturity period 1 year. Interest to be compounded semi-annually.

NB: Assume that TMM Limited is a government corporation managed by the central government.

Required:

Calculate the following:
Inventory turnover days
Accounts payable payment days
Accounts receivable payment days
Cash deficit/surplus
Comment whether or not the company will meet obligations as they fall due

Consider the options available to the company to finance short-term cash shortfalls. Select with relevant calculations the option which may be suitable for the company.