Question: The financial statements of Freezeqwik Ltd, a distributor of frozen foods, are set out below for the year ended 31 December last year.
Income statement (profit and loss account)
for the year ended 31 December last year
|
|
£000
|
£000
|
|
Sales revenue
|
|
820
|
|
Less Cost of sales
|
|
|
|
Opening inventories
|
142
|
|
|
Purchases
|
568
|
|
|
|
710
|
|
|
Less Closing inventories
|
166
|
544
|
|
Gross profit
|
|
276
|
|
Administration expenses
|
(120)
|
|
|
Selling and distribution expenses
|
(95)
|
|
|
Financial expenses
|
(32)
|
(247)
|
|
Net profit
|
|
29
|
|
Corporation tax
|
|
(7)
|
|
Net profit after tax
|
|
22
|
Balance sheet as at 31 December last year
|
Non-current assets
Property, plant and equipment
|
£000
|
£000
|
£000
|
|
Freehold premises at valuation
|
|
|
180
|
|
Fixtures and fittings at written-down value
|
|
|
82
|
|
|
|
|
102
|
|
Motor vans at written-down value
|
|
|
|
|
364
|
|
Current assets
|
|
|
|
|
Inventories
|
|
166
|
|
|
Trade receivables
|
|
264
|
|
|
Cash
|
|
24
|
|
|
|
|
454
|
|
|
Less Current liabilities
|
|
|
|
|
Trade payables
|
159
|
|
|
|
Corporation tax
|
7
|
166
|
288
|
|
|
|
|
652
|
|
Equity
|
|
|
|
|
Ordinary share capital
|
|
|
300
|
|
Preference share capital
|
|
|
200
|
|
Retained profit
|
|
|
152
|
|
|
|
|
652
|
All purchases and sales are on credit. There has been no change in the level of receivables or payables over the period.
Calculate the length of the OCC for the business and go on to suggest how the business may seek to reduce this period.