Chat with us, powered by LiveChat QUESTION4 (10 + 10 = 20 marks)Modern Furniture Ltd - Writemia

QUESTION4 (10 + 10 = 20 marks)Modern Furniture Ltd

QUESTION4 (10 + 10 = 20 marks)Modern Furniture Ltd competes in themodern furniture retail market alongsideAdair’s, Harvey Norman and other major furniture retailers. The market is highly competitive prompting management to review working capital practices. Detailed below are relevant figures and ratios to assist you in evaluatingModern Furniture’s working capital management.Working Capital Ratios2014201520162017Accounts Receivable Days30.0 days38.6 days44.0 days51.0 daysInventory Days30.0 days34.5 days37.0 days46.0 daysAccounts Payable Days29.6 days30.2 days38.2 days53.0 daysNote: Ratios are based on assuming end year figures are the average throughout the majority of the yearExtracts from Financial StatementsCash on hand0.35mill0.3mill.01mill.005millSales all on credit15 mill14 mill15mill16millAccounts Receivable Balance1.2 mill1.5 mill1.8 mill2.2 millInventory0.66 mill0.79 mill0.9 mill1.17millCost of Goods Sold8.0 mill8.5 mill8.9 mill9.3 millAccounts Payable0.65mill0.7 mill0.95 mill1.35 millBudgeted FiguresCash on hand0.3 mill0.3 mill0.31 mill0.32 millAccounts Receivable Balance1.2 mill1.22 mill1.28 mill1.35 millInventory Balance0.7 mill0.72 mill0.78 mill0.80 millAccounts Payable0.64 mill0.65 mill.70 mill0.71 millAccounts Receivable Terms30 days 30 days 30 days 30 daysAccounts Payable Terms45 days45 days45 days45 daysIndustry AveragesAccounts Receivable Days30.1 days29.6 days30.4 days33.1 daysInventory Days30 days31 days33 days32.2 daysAccounts Payable Days30 days28.5days17 days15 days

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