Tshepo the Jean Maker has selected you to assist him with his cashflow management. He needs...

Transcribed Image Text:

Tshepo the Jean Maker has selected you to assist him with his cashflow management. He needs assistance to understand his current cashflow situation and impact of any variations. The production cycle for Tshepo Jeans is as follows: Cotton for the denim is sourced and woven in Zimbabwe yielding denim fabric. The fabric is then transported to Japan for assembly, landed in South Africa as finished goods and sold in his stand-alone retail stores. The cash cycle components are as follows: • Sourcing and Weaving - 21 days • Logistics to Japan - 10 days • Assembly - 14 days • Logistics to South Africa - 7 days Conversion to Cash Sales - 20 days • Payment terms with Zimbabwe Producers - 30 days Payment terms with Japan Factory - 14 days . You are required to: • Calculate the current Work in Progress to Finished Goods landing duration in days (5) • What are the total Accounts Payable/Creditor days (2) • Calculate the current cash cycle (3) Is the cash cycle favourable or unfavourable? Why? (2) In your opinion, which levers can Tshepo Jeans pull to shorten his cash conversion cycle? (18) Unpack the above with calculations and short narratives (i.e. recalculate an ideal shortened cash cycle in line with your view on levers to pull) Tshepo the Jean Maker has selected you to assist him with his cashflow management. He needs assistance to understand his current cashflow situation and impact of any variations. The production cycle for Tshepo Jeans is as follows: Cotton for the denim is sourced and woven in Zimbabwe yielding denim fabric. The fabric is then transported to Japan for assembly, landed in South Africa as finished goods and sold in his stand-alone retail stores. The cash cycle components are as follows: • Sourcing and Weaving - 21 days • Logistics to Japan - 10 days • Assembly - 14 days • Logistics to South Africa - 7 days Conversion to Cash Sales - 20 days • Payment terms with Zimbabwe Producers - 30 days Payment terms with Japan Factory - 14 days . You are required to: • Calculate the current Work in Progress to Finished Goods landing duration in days (5) • What are the total Accounts Payable/Creditor days (2) • Calculate the current cash cycle (3) Is the cash cycle favourable or unfavourable? Why? (2) In your opinion, which levers can Tshepo Jeans pull to shorten his cash conversion cycle? (18) Unpack the above with calculations and short narratives (i.e. recalculate an ideal shortened cash cycle in line with your view on levers to pull)

Answer rating: 100% (QA)

To assist Tshepo the Jean Maker with his cash flow management calculate the relevant durations and analyze the cash cycle components 1 Calculate the current Work in Progress to Finished Goods landing ... View the full answer