Modern Kitchens specializes on sell prefabricated kitchens. The company has stores in all major capital cities throughout Australia. It’s been established since 2001 and has seen tremendous growth but more recently has seen several overseas competitors enter the Australian market resulting in an increase in competition. This increased competition has placed significant pressure on containing costs and drawn management’s attention to a review of working capital practices. Detailed below are relevant figures and ratios to assist you in evaluating Modern Kitchen’s working capital management. Working Capital Ratios 2016 2017 2018 2019Accounts Receivable Days 14.0 days 18.1 days 23.1 days 31.9 daysInventory Days 16.0 days 19.1 days 21.9 days 25.0 days Accounts Payable Days 14.1 days 21. days 29.0 days 37.0 daysNote: Ratios are based on assuming end year figures are the average throughout the majority of the yearExtracts from Financial StatementsCash on hand 0.20 mill 0.15 mill .01 mill (.003 mill)Sales – all on credit 8.1 mill 6.9 mill 8.0 mill 9.0 millAccounts Receivable Balance 0.3069 mill 0.3453 mill 0.5044 mill 0.7894 millInventory 0.1754 mill 0.2186 mill 0.2712 mill 0.3219 millCost of Goods Sold 4.0 mill 4.2 mill 4.5 mill 4.7 millAccounts Payable 0.1534 mill 0.2417 mill 0.3574 mill 0.4762millBudgeted Figures Cash on hand 0.3 mill 0.3 mill 0.31 mill 0.32 millAccounts Receivable Balance 0.30 mill 0.31 mill 0.37 mill 0.38 millInventory Balance 0.16 mill 0.17 mill 0.20 mill 0.21 millAccounts Payable 0.16 mill 0.17 mill .19 mill 0.20 millAccounts Receivable Terms 14 days 14 days 14 days 14 days Accounts Payable Terms 30 days 30 days 30 days 30 daysIndustry AveragesAccounts Receivable Days 14 days 14 days 15 days 16 daysInventory Days 15 days 16 days 16 days 15 daysAccounts Payable Days 30 days 28 days 25 days 20 days
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