Jennifer Dawes is a young, vibrant entrepreneur whose business venture, Jennifer Limited, has rapidly expanded as she developed new product lines and gained new customers. She has found, however, that even though her last financial statements have shown healthy profits, she sometimes has difficulty meeting in a timely manner, suppliers’ and utility bills and the payroll of employees. Miss Dawes has been further alarmed upon being informed that many businesses which appeared profitable have still gone into insolvency. A. Advise Jennifer on the role of working capital management in a business. B. Describe, for her, TWO (2) consequences of poor working capital management. Extracts from Annual Accounts of Jennifer Limited $ Inventories: Raw materials 108 000 Work in progress 75 600 Finished goods 86 400 Purchases of raw materials 518 400 Cost of production 675 000 Cost of goods sold 756 000 Sales 864 000 Accounts receivables 172 800 Accounts payables 86 400 C. Calculate the length of the working capital cycle or net operating cycle (assume 365 days in the year)
Jennifer Dawes is a young, vibrant entrepreneur whose business venture, Jennifer Limited, has
rapidly expanded as she developed new product lines and gained new customers. She has found,
however, that even though her last financial statements have shown healthy profits, she sometimes
has difficulty meeting in a timely manner, suppliers’ and utility bills and the payroll of employees.
Miss Dawes has been further alarmed upon being informed that many businesses which appeared
profitable have still gone into insolvency.
A. Advise Jennifer on the role of working capital management in a business.
B. Describe, for her, TWO (2) consequences of poor working capital management.
Extracts from Annual Accounts of Jennifer Limited
$
Inventories: Raw materials 108 000
Work in progress 75 600
Finished goods 86 400
Purchases of raw materials 518 400
Cost of production 675 000
Cost of goods sold 756 000
Sales 864 000
Accounts receivables 172 800
Accounts payables 86 400
C. Calculate the length of the working capital cycle or net operating cycle (assume 365 days
in the year)
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