Question 1 Discuss temporary and permanent working capital

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Question 1

Discuss temporary and permanent working capital.

Question 2

The summarized current assets and current liabilities of Newton Blid as as follows :

Current assets                                                       RM

Cash and marketable securities                            50,000

Accounts receivable                                              7'5,000

Inventory                                                               67,000

Total current assets                                              192,000

Current liabilities

Accounts payable                                                 48,000

Bank loan                                                             66,000

Accruals                                                               15,000

Total current liabilities                                          121,000

Sales. for the firm amount to RM 300,000 and cost of goods sold is 45% of sales.The payable deferral period is :13 days.

Required:

a. Compute the firm's operating cycle

b. Compute the firm's cash conversion cycle

Question 3

The following are information SM Products Bhd's inventory turnover days, debtorsr collection period and payables credit period

Inventory turnover days            :           90 days

Accounts receivable                 :            50 days

Account payable                      :             30 days

The firm has annual sales of about RM30 million .

a. Calculate the firm's operating cycle

b. Calculate the firm's cash conversion cycle

c. With the help of a diagram, explain the concepts of cash conversion cycle and working capital .1" operating cycle