Dzinget Pvt Ltd is a newly formed company that specializes in building equipment. You have been recently recruited as the financial manager of the company and you would like to first determine the cash operating cycle of the company. The following data for the past 2 years has been provided:
| Item | 31/12/20 ($) | 31/12/21 ($) |
|------|--------------|--------------|
| Credit sales | 1786,000 | 1,800,000 |
| Purchase of raw materials | 592,500 | 746,000 |
| Raw materials consumed | 560,000 | 705,000 |
| Cost of goods produced | 990,000 | 1,300,000 |
| Cost of goods sold | 900,000 | 1,350,000 |
| Book debtors | 310,000 | 392,000 |
| Creditors | 90,000 | 148,000 |
| Stocks | Raw material 45,000 | 30,000 |
| Work in progress | 30,000 | 60,000 |
| Finished goods | 12,500 | 37,500 |
Required:
a) Assuming a 360-day year, compute the following items for the 2 years:
i. Raw Material Conversion Time (4 marks)
ii. Work-in-Progress Conversion Time (4 marks)
iii. Finished Goods Conversion Time (4 marks)
iv. Creditors Conversion Time (4 marks)
v. Debtors Conversion Time (4 marks)
vi. Cash Conversion Cycle
b) Using the results in (a) above, comment on whether there was an improvement or not for Dzinget Pvt Ltd in terms of the cash conversion cycle (4 marks)
c) In the context of Small and Medium Enterprises in Zimbabwe, examine any four benefits of enhancing liquidity management. (12 marks)
