CASH CONVERSION & FACTORING ASTRA PK has the following highlights from its financial statements for the year ending 31 M

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Cash Conversion Factoring Astra Pk Has The Following Highlights From Its Financial Statements For The Year Ending 31 M 1 (51.2 KiB) Viewed 29 times

CASH CONVERSION & FACTORING ASTRA PK has the following highlights from its financial statements for the year ending 31 March 2020: £305,000 Debtors / Receivables Trade creditors / Payables £200,000 Stock /Inventory £200,200 Sales / Revenue £1,700,000 Purchases £1,450,000 Cost of Goods sold / Cost of sales £1,400,000 Other information: 30-days credit is ASTRA PK's normal practice, 5% of bad debts are written off and debtors receivables are financed by an overdraft which attracts an interest rate of 9% per annum A factoring company has offered: To advance 80% of funds of the debtors / receivables if debtors / receivables stick to the 30 days credit limit. The interest rate for the advance will be 7%. The factoring company will also charge a fee for this factoring service which will be 10% of revenue / sales. If the factoring option is taken ASTRA PK will save £10,000 per annum and bad debts will become zero Required: a. Calculate the cash conversion cycle or cash cycle for ASTRA PK b. Should ASTRA PK take up the factoring option?