Please can you help me answer this past paper question on ratios?
includes working capital cycle, acid test ratio, ratio of sales to net working capital and current net working capital
Please Can You Help Me Answer This Past Paper Question On Ratios Includes Working Capital Cycle Acid Test Ratio Ratio 1 (56.29 KiB) Viewed 47 times
Question 21 DCC Plc, a multinational company, has annual credit sales of $5.4 million and related cost of sales are $2.16 million. Financial information relating to DCC Plc is as follows: S'000 000 Inventory 473.4 Trade Receivables 1.331.5 1.804.9 Trade Payables Overdraft 177.5 1.326.61.504.1 Networking capital 300.8 For the financial year of 2023, DCC Plc expects a fall in the cost of sales which would decline to 60% of sales, meanwhile the credit sales would have no change. DCC Plc plans to change working capital policy in order to improve its profitability. As a result of the policy change, the following working capital ratio values are expected: Inventory days: 50 days Trade receivables days: 62 days Trade payables days: 45 days Current ratio: 1.3 times Required: (a) Calculate the working capital cycle of DCC Plc and comment on your findings. (8 marks) (b) Calculate the target quick ratio (acid test ratio) and the target ratio of sales to net working capital of DCC Plc at the end of March 2023. (7 marks) (e) Compare the current net working capital with the expected one in 2023 and comment on how the working capital policy would have changed. (10 marks) (Total 25 marks)
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