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Category > Management Posted 06 Jul 2017 My Price 12.00

Hercules Wholesalers Ltd

Hercules Wholesalers Ltd has been particularly concerned with its liquidity position in recent months. The most recent income statement and statement of financial position (balance sheet) of the business are as follows:

Income statement for the year ended 31 December last year

 

 

£000

£000

Sales revenue

 

452

Cost of sales

 

 

Opening inventories Purchases

125 341

 

 

466

 

Closing inventories Gross profit Expenses Loss for the year

(143)

(323) 129 (132) (3)

Statement of financial position as at 31 December last year

 

 

£000

Non-current assets

 

Property, plant and equipment Premises at valuation

280

Fixtures and fittings at cost less depreciation Motor vehicles at cost less depreciation

25 52 357

Current assets

 

Inventories

143

Trade receivables

163

 

306

Total assets

663

Equity Ordinary share capital Retained earnings

100 158 258

Non-current liabilities

 

Borrowings – Loans Current liabilities

120

Trade payables Borrowings – Bank overdraft

145 140 285

Total equity and liabilities

663

The trade receivables and payables were maintained at a constant level throughout the year.

Required:

(a) Explain why Hercules Wholesalers Ltd is concerned about its liquidity position.

(b) Calculate the operating cash cycle for Hercules Wholesalers Ltd based on the information above. (Assume a 360-day year.)

(c) State what steps may be taken to improve the operating cash cycle of the business

Answers

Maurice Tutor
(5)
Status NEW Posted 06 Jul 2017 02:07 PM My Price 12.00

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