Section B - Case 1: Zephyr Co
Zephyr Co is a rapidly growing e-commerce startup specializing in bespoke furniture. Despite surging revenues, the company is experiencing severe cash flow difficulties.
Current financial data:
Revenue: $12,000,000 (all on credit)
Cost of Sales: $8,000,000
Trade Receivables: $2,500,000
Trade Payables: $1,200,000
Inventory: $1,500,000
Assume a 365-day year.
Zephyr Co is considering introducing an early settlement discount of 2% for payment within 10 days. They currently allow 60 days for payment, though customers take longer on average.
What is Zephyr Co's current receivables collection period (in days)?
ACCA · Question 18 · Working Capital Management
Section B - Case 1: Zephyr Co
Zephyr Co is a rapidly growing e-commerce startup specializing in bespoke furniture. Despite surging revenues, the company is experiencing severe cash flow difficulties.
Which of the following are classic symptoms of 'overtrading' that Zephyr Co might be exhibiting? (Select ALL that apply)
Answer options:
Rapid increase in sales revenue.
Increasing current ratio and quick ratio.
Disproportionate increase in current assets and current liabilities.
High levels of cash and cash equivalents.
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