You are hired to provide comments on the working capital management of David Limited. It is given that the inventory of

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You are hired to provide comments on the working capital
management of David Limited. It is given that the inventory of
David Limited is $100,000 at the beginning of the year, and it is
$140,000 at the end of the year. The costs of goods sold of the
company is 60% of sales revenue, and the company has sales revenue
of $3 million. David Limited does not offer any sales and trade
discount for the customers, and the company grants a credit period
of 30 days to the customers. David limited would enjoy a 2%
discount from its supplier if the payment is made within 5 days;
otherwise, the full amount must be paid within 30 days of the
invoice. The accounts receivable turnover is 10 times, and the
average accounts payable is $36,000. The targeted inventory period,
the targeted operating cycle, and the targeted cash cycle are at
most 30 days, 60 days, and 50 days respectively.
a) Calculate the inventory period and the average collection
period of the company.
b) Calculate the operating cycle of the company.
c) Discuss (with not more than 80 words) whether there is any
problem in accounts receivable management, and whether the company
can meet the targeted inventory period and the targeted operating
cycle.
d) Could David Limited enjoy the 2% discount from its
supplier?
e) Could David Limited meet the targeted cash cycle?
f) Briefly discuss (with not more than 60 words) whether David
Limited could reduce the cash cycle by paying the bills to the
suppliers sooner if this action does not affect the average
collection period and inventory periods.