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Question 8 (10 marks) The following information is extracted from the financial statements of XP...

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Accounting

Question 8 (10 marks)

The following information is extracted from the financial statements of XP Sports Limited:

Cash

$677,423

Accounts Payable

$1,721,669

Accounts Receivable

$1,845,113

Notes Payable

$2,113,345

Inventories

$1,312,478

Total Current Assets

$3,835,014

Total Current Liabilities

$3,835,014

Net Sales

$9,912,332

Cost

$5,947,399

  1. Briefly explain what you understand by the term operating cycle. (2 marks)

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  1. What is the operating cycle for XP Sports Limited? (2 marks)

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  1. What can you say about XP Sports accounts receivable and inventory management if it is known that the industry average operating cycle is 72 days? (1 mark)

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  1. Briefly explain what you understand by the cash conversion cycle. (2 marks)

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  1. What is the cash conversion cycle for XP Sports Limited? (2 marks)

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  1. What can you say about XP Sports cash conversion cycle if it is known that the industry average cash conversion cycle is 42 days? (1 mark)

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