Accounting 9706 · AS & A Level · Analysis and communication of accounting information

Analysis and communication of accounting information — practice question

YGP Traders Limited has been operating for several years and its year end falls on 31 December. It trades in one product only and all of its transactions are carried out on credit. The business has a large bank overdraft, and the directors are worried about the firm’s working capital position.
(a(i))[1]

Calculate the revenue for 2017.

(a(ii))[1]

Calculate the cost of sales in 2017.

(a(iii))[1]

Calculate the trade receivables at the end of 2017.

(a(iv))[3]

Calculate the average inventory at cost price for 2017.

(b)[2]

State what the working capital cycle measures.

(c)[7]

Calculate the working capital cycle for the year under review.

(d)[5]

Calculate a revised working capital cycle for 2017 assuming this strategy was in place from the beginning of the year.

(e)[5]

Advise the directors on whether they should go ahead with this strategy. Justify your answer.

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