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 19 · Working Capital Management
Section B - Case 1: Zephyr Co
To reduce inventory holding costs, Zephyr Co's operations director suggests implementing a Just-in-Time (JIT) inventory system for their bespoke furniture materials.
Which of the following is a critical prerequisite for the successful implementation of a JIT system?
Answer options:
Large warehouse capacity to store buffer inventory.
Highly reliable suppliers with zero-defect quality control.
The ability to purchase raw materials in massive bulk quantities to get discounts.
A highly volatile and unpredictable customer demand pattern.
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