Answer Happy

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.
(5 marks)