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Section B - Case 1: VerdiGrow
Scenario: VerdiGrow is an agricultural technology firm facing cash flow issues due to seasonal demand. The company currently has the following working capital metrics:
- Receivables days: 65 days
- Payables days: 40 days
- Inventory days: 55 days
VerdiGrow's main supplier is offering an early settlement discount of 2% if invoices are paid within 10 days, rather than the current 60 days taken by VerdiGrow. Assume a 365-day year.
Question:
What is VerdiGrow's current cash operating cycle?
ACCA · Question 20 · Working Capital Management
Section B - Case 1: VerdiGrow
Scenario: VerdiGrow is an agricultural technology firm facing cash flow issues due to seasonal demand. The company currently has the following working capital metrics:
- Receivables days: 65 days
- Payables days: 40 days
- Inventory days: 55 days
To resolve its cash flow issues, VerdiGrow decides to finance all of its fluctuating current assets and a portion of its permanent current assets using a short-term bank overdraft.
Question:
What type of working capital financing policy has VerdiGrow adopted?
Section B - Case 1: VerdiGrow
Scenario: VerdiGrow is an agricultural technology firm facing cash flow issues due to seasonal demand. The company currently has the following working capital metrics:
- Receivables days: 65 days
- Payables days: 40 days
- Inventory days: 55 days
To resolve its cash flow issues, VerdiGrow decides to finance all of its fluctuating current assets and a portion of its permanent current assets using a short-term bank overdraft.
Question:
What type of working capital financing policy has VerdiGrow adopted?
Answer options:
Conservative policy
Matching policy
Aggressive policy
Hedging policy
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