Page 17 - CIMA OCS Workbook February 2019 - Day 2 Tasks

Chapter 10

FINANCIAL REPORTING AND

TAXATION (F1)

PRACTICE TASKS

EXERCISE 1 (WORKING CAPITAL)

UPDATE

At the last directors’ board meeting, there was heated discussion about how best to improve the
company’s management of working capital. Based upon the annual financial statements for the
year ended 31 December 2018, there were increased levels of inventories and trade receivables in
comparison with the previous year-end. Ben Darcy argued in favour of increased inventory levels
as this enabled Trigg Adventure to respond quickly to demand from customers in both the
domestic and commercial markets.

Sally Gomez was in favour of extending credit periods available to commercial customers as she
saw this as a key component of having commercial advantage over competitors who sell similar
products.

TRIGGER
This morning you received the following email from Tony Trigg:

From: Tony Trigg, Managing Director.
To: Finance Officer
Subject: Working capital.

Hi.

Following the recent board meeting, I’d like you to look into some issues associated with our
management of working capital. The level of inventory and receivables seems to be increasing
and, whilst I can understand why this may be beneficial to our production and sales
departments, it does incur a cost to the business.

It would be interesting to compare our working capital figures with those of a competitor to see
if the comparison highlights any points that we may be able to improve.

KAPLAN PUBLISHING 39