PPW Ltd is a mid-sized manufacturing company producing household appliances for the Indian market. With competition heating up, the company's…

PPW Ltd is a mid-sized manufacturing company producing household appliances for the Indian market. With competition heating up, the company's management is becoming increasingly conscious about liquidity management and efficient use of working capital. During the last financial year, the company recorded annual sales of 48,00,000, offering its customers a 3-month credit period to encourage bulk orders. While this has boosted sales, it has also tied up significant funds in debtors. On the production side, the company incurs the following annual costs: Materials consumed:12,00,000 (suppliers allow 2 months' credit)Wages:9,60,000 (paid with a 1-month lag)Cash manufacturing expenses:12,00,000 (settled 1 month in arrears)Administrative expenses:3,60,000 (paid with a 1-month lag)Sales promotion expenses:1,20,000 (paid monthly in advance to agencies) The company sells its products at a gross profit margin of 20%. It also maintains 2 months' stock of raw materials and 2 months' stock of finished goods to ensure smooth production and timely delivery to distributors. Further, depreciation is considered part of the cost of production, but since it does not require a cash outflow, management wants to ignore it while assessing the cash cost basis of working capital. A minimum cash balance of 1,00,000 is always retained for contingencies. Now, the Board of Directors has asked the finance team to answer the following 5 questions: