following balances are extracted from the books of XYZ Ltd at the end of May 2008 and 2009. 2 0 0 9 2008 Details Kshs Kshs Debtors 1 0 5 , 0 0 0 85,000 Stock 3 5 , 0 0 0 45,000 Creditors 6 3 , 0 0 0 40,000 Provision for taxation 2 5 , 0 0 0 20,000 Proposed dividend 3 0 , 0 0 0 30,000 Bank overdraft 1 7 , 0 0 0 25,000 Sales 1 , 2 0 0 , 0 0 0 1,200,000 Purchases 1 , 0 0 0 , 0 0 0 1,000,000 Required (a) Calculate liquidity ratios and interpret your answer (b) Calculate Average Collection Period for the 2 years’ (c) Calculate Average Payment Period for the 2 years (d) Interpret your answers.

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Author:Libby
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Chapter1: Financial Statements And Business Decisions
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The following balances are extracted from the books of XYZ Ltd at the end of May 2008 and
2009.
2 0 0 9 2008
Details Kshs Kshs
Debtors 1 0 5 , 0 0 0 85,000
Stock 3 5 , 0 0 0 45,000
Creditors 6 3 , 0 0 0 40,000
Provision for taxation 2 5 , 0 0 0 20,000
Proposed dividend 3 0 , 0 0 0 30,000
Bank overdraft 1 7 , 0 0 0 25,000
Sales 1 , 2 0 0 , 0 0 0 1,200,000
Purchases 1 , 0 0 0 , 0 0 0 1,000,000
Required
(a) Calculate liquidity ratios and interpret your answer
(b) Calculate Average Collection Period for the 2 years’
(c) Calculate Average Payment Period for the 2 years
(d) Interpret your answers.

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