You have recently joined Plex Ltd, a distribution company , as Operations Manager and working capital management is one of the areas that you are responsible for You have decided to compare the working capital details of Plex Ltd with those of a similar company in the same industry, Elix Ltd The following information is available Plex Ltd Elix Ltd Annual sales revenue 1,000,000 980,000 Mark up on cost of sales 40 45 Receivables collection period 60 days 33 days Inventory turnover per year 4 times 5 times Payables payment period 32 days 45 days REQUIRED Calculate the length of the working capital cycle in days for both Plex Ltd and Elix Ltd (2 marks) Calculate the amount of working capital required for both Plex Ltd and Elix Ltd (round your figures to the nearest euro) (8 marks) Explain what working capital cycle and working capital required means

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Question: You have recently joined Plex Ltd, a distribution company , as Operations Manager and working capital management is one of the areas that you are

You have recently joined Plex Ltd, a distribution company, as Operations Manager and working capital management is one of the areas that you are responsible for. You have decided to compare the working capital details of Plex Ltd with those of a similar company in the same industry, Elix Ltd.

The following information is available:

	Plex Ltd	Elix Ltd
Annual sales revenue	1,000,000	980,000
Mark-up on cost of sales	40%	45%
Receivables collection period	60 days	33 days
Inventory turnover per year	4 times	5 times
Payables payment period	32 days	45 days

REQUIRED:

Calculate the length of the working capital cycle in days for both Plex Ltd and Elix Ltd. (2 marks)

Calculate the amount of working capital required for both Plex Ltd and Elix Ltd (round your figures to the nearest euro). (8 marks)

Explain what working capital cycle and working capital required means.

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