Solartec Industries Ltd manufactures solar panels in Malaysia. In 2024, SIL has been experiencing difficulties managing its inventory levels due to supply chain disruptions. As a result, its stock turnover ratio has worsened.
Define the term 'stock turnover ratio'.
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Bangkok Fresh Foods Co operates a chain of convenience stores across Thailand. The company deals primarily in perishable goods and ready-to-eat meals. Its managers have recently decided to focus on improving the stock turnover ratio.
State two ways to improve the stock turnover ratio.
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Emirates Industrial Solutions PLC had a gearing ratio of 65% in 2024, causing concern among shareholders about financial stability.
State two problems associated with high gearing.
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Jakarta Wholesale Distribution experiences regular delays in customer payments, affecting its working capital in 2024. Its debtor days ratio has recently worsened.
State two methods to reduce debtor days.
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Mumbai Textiles Ltd provides 60-day trade credit terms to its business customers but struggled with late payments in 2024.
Define the term 'trade credit'.
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In 2024, Brazilian Steel Manufacturing negotiated improved payment terms with suppliers to better manage working capital, increasing its creditor days ratio significantly.
State two advantages of high creditor days.
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German Auto Parts Ltd experiences supplier relationship issues due to payment practices, which often result in late settlement of outstanding invoices.
State two consequences of late supplier payments.
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IKEA works out how long it takes to pay its suppliers. In 2024, it asked its key suppliers for more time to pay its bills.
Describe one reason why IKEA might want to take longer to pay suppliers.
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Stream Design Studios is a graphic design company that creates marketing materials for small and medium-sized businesses. The company has recently expanded its services to include web development and social media management, requiring significant investment in new software and employee training.
Stream’s financial ratios show mixed results. Its debtor days ratio has increased due to extended payment terms for some clients, causing cash flow challenges. Meanwhile, its stock turnover ratio has remained stable, as digital services do not require physical inventory. The company’s gearing ratio has also risen slightly due to a new loan used to fund the expansion.
To address these issues, Stream Design Studios is considering incentivising clients to pay invoices faster and using profits from its core design services to pay down the loan.
Analyse two advantages and one disadvantage of incentivising clients to reduce Stream Design Studios’ debtor days ratio.
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Stream Design Studios is a graphic design company that creates marketing materials for small and medium-sized businesses. The company has recently expanded its services to include web development and social media management, requiring significant investment in new software and employee training.
Stream’s financial ratios show mixed results. Its debtor days ratio has increased due to extended payment terms for some clients, causing cash flow challenges. Meanwhile, its stock turnover ratio has remained stable, as digital services do not require physical inventory. The company’s gearing ratio has also risen slightly due to a new loan used to fund the expansion.
To address these issues, Stream Design Studios is considering incentivising clients to pay invoices faster and using profits from its core design services to pay down the loan.
Explain one advantage and one disadvantage of extending payment terms for clients at Stream Design Studios.
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Belvedere Event Management organises weddings, corporate events, and festivals. The company recently expanded into luxury event planning, requiring significant investment in new marketing campaigns and hiring additional staff.
Belvedere's financial ratios highlight areas for improvement. Its creditor days ratio has increased due to extended payment terms negotiated with suppliers, which has helped improve liquidity. However, its return on capital employed (ROCE) has decreased, as recent investments have not yet generated significant returns. The company is also concerned about its debtor days ratio, which has risen due to delayed payments from corporate clients.
Explain one advantage and one disadvantage to Belvedere Event Management of negotiating longer creditor days with suppliers.
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Belvedere Event Management organises weddings, corporate events, and festivals. The company recently expanded into luxury event planning, requiring significant investment in new marketing campaigns and hiring additional staff.
Belvedere's financial ratios highlight areas for improvement. Its creditor days ratio has increased due to extended payment terms negotiated with suppliers, which has helped improve liquidity. However, its return on capital employed (ROCE) has decreased, as recent investments have not yet generated significant returns. The company is also concerned about its debtor days ratio, which has risen due to delayed payments from corporate clients.
Describe two factors Belvedere Event Management should consider when managing its debtor days ratio.
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Bright Studios Photography offers professional photography services for weddings, portraits, and commercial projects. The company recently expanded into videography, requiring investment in new equipment and training for its photographers.
Bright Studios’ stock turnover ratio has decreased slightly due to delays in selling older photography packages. Meanwhile, its gearing ratio has remained stable, but management is reviewing whether taking on additional debt to purchase advanced equipment for videography is a sound decision. The company’s creditor days ratio has also risen as it negotiates extended payment terms with suppliers to improve cash flow.
Management is exploring whether to sell older photography equipment to improve liquidity and whether investing in advanced videography technology will yield sufficient returns.
Describe two factors Bright Studios Photography should consider when evaluating its stock turnover ratio.
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Bright Studios Photography offers professional photography services for weddings, portraits, and commercial projects. The company recently expanded into videography, requiring investment in new equipment and training for its photographers.
Bright Studios’ stock turnover ratio has decreased slightly due to delays in selling older photography packages. Meanwhile, its gearing ratio has remained stable, but management is reviewing whether taking on additional debt to purchase advanced equipment for videography is a sound decision. The company’s creditor days ratio has also risen as it negotiates extended payment terms with suppliers to improve cash flow.
Management is exploring whether to sell older photography equipment to improve liquidity and whether investing in advanced videography technology will yield sufficient returns.
Analyse two advantages and one disadvantage of investing in advanced videography equipment for Bright Studios Photography.
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