Accounting for Managers: Solutions for Cash Cycle, Pricing Policy and Special Orders

ACCOUNTING FOR MANAGERS
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Contents
Solution 1:.............................................................................................................................................3
Solution 2:.............................................................................................................................................5
Solution 3:.............................................................................................................................................9
Bibliography........................................................................................................................................11
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Solution 1:
Taking the data for the latest annual report of Woolsworth group, we have calculated the cash
cycle of the company for the last five years:
Particulars 2018 2017 2016 2015 2014 2013
Inventory 4,233.00 4,080.40 4,558.50 4,872.20 4,693.20 4,205.40
Debtors 894.00 816.80 849.80 1,001.90 965.20 985.20
Creditors 5,316.00 5,068.20 4,809.10 5,040.00 4,588.40 4,080.00
Cogs
40,017.0
0
39,546.1
0
38,309.3
0
42,596.6
0
44,295.2
0
42,754.9
0
Sales
56,726.0
0
55,475.0
0
53,473.9
0
58,812.0
0
60,772.8
0
58,516.4
0
Average
Inventory
4,156.70 4,319.45 4,715.35 4,782.70 4,449.30 2,102.70
Average Debtor 855.40 833.30 925.85 983.55 975.20 492.60
Average Creditor 5,192.10 4,938.65 4,924.55 4,814.20 4,334.20 2,040.00
Inventory
Turnover
37.91 39.87 44.93 40.98 36.66 17.95
Debtor Turnover 5.50 5.48 6.32 6.10 5.86 3.07
Creditor Turnover 47.36 45.58 46.92 41.25 35.71 17.42
Cash Cycle -3.94 -0.23 4.33 5.83 6.81 3.61
Cash cycle is the time period in which the business makes and receives payment from its
creditors and debtors. (Ittelson, 2009) Cash cycle include the time taken to recover cash form
inventories, debtors net of payment made to creditor (McLaney & Adril, 2016)s. Lower the
cash cycle better is the cash movement. We can see that the company has a very cash cycle,
which indicates high liquidity. This is good for the company.
The cash flow statement of the company depicts that the net cash flow for the company has
increased to $360 million from negative $38 million. The cash flows from operating activities
show a major decline in outflow of cash towards financing cost. But since the company has
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made higher payments to its creditors in the current year the overall cash from operating
activities of the company has declined from $ 3122 million to $ 2930 million. Also there has
been a lower cash outflows from investing and financing activities of the company from last
year which have contributed towards higher net cash inflow.
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