Skip to content
ACCA exam results — Are you ready?Chat about it >>

Ask the Tutor ACCA FM

Working capital cycle

NNikita4y ago
Mile Co is looking to change its working capital policy to match the rest of the industry. The following results are expected for the coming year: $'000 Revenue 20,500 Cost of sales (12,800) Gross profit 7,700 Revenue and cost of sales can be assumed to be spread evenly throughout the year. The working capital ratios of Mile Co, compared with the industry, are as follows: Mile Co Industry Receivable days 50 42 Inventory days 45 35 Payable days 40 35 Assume there are 365 days in each year. If Mile Co matches its working capital cycle with the industry, what will be the decrease in its net working capital? while calculating net inventory and payable effect shouldnt it be 15/365*12800 ? because 10 days are to be reduced from invenotry and 5 days from payables?
John MoffatJohn MoffatTutor4y ago#1
Inventory is an asset whereas payables are a liability, so you cannot add the 10 days and the 5 days together :-)
NNikita4y ago#2
got it now... such a silly question , thanks for clearing it up!
John MoffatJohn MoffatTutor4y ago#3
You are welcome :-)
This topic is locked — no new replies.