Reference no: EM132545673

The company sells 60% of its products on credit and its credit terms to its customers are 30 days. The company purchases 70% of its products on credit from its suppliers and the suppliers settlement agreement is 60 days. the owners of the company are quite concerned about the liquidity position of the company. the accountant collected data and prepared the following table with information relating to the liquidity ratios and activity ratios for the company and the industry in which it operates: current ratio 4.7 on greenfields and 4 on agriculture industry, quick ratio 1.8 on greenfields and 3.5 on agriculture industry, inventory turnover ration 5.2 on greenfields and 8.4 on agriculture industry, average collection period 75 days on greenfields and 45 on agriculture industry and average payment period 33 days on greenfields and 55 on agriculture industry. You have been contarcted by the managing director of the company to help her to diagnose any liquidity problems the company may have and to make recommendations to maintain adequate liquidity.

Question 1: Is current inventory management affecting the company's liquidity? If it is, then present three possible recommendations relating to the management of inventory to the managing director to adress the liquidity problem.

Question 2: Is current trade receivables management affecting the company's liquidity? If it is, then present three recommendations relating to the management of trade receivables to the managing director to adress the liquidity problem.

Question 3: Is current trade payables management affecting the company's liquidity? If it is, then present two recommendations relating to the management of trade payables to the managing director to adress the liquidity problem.