YEAR 2013

This indicates that zapatoes, inc. collects receivables about 1.29 times a year

YEAR 2014

Zapatoes, Inc. collects receivables about 1.27 times a year

YEAR 2014

Zapatoes, Inc. collects receivables about 1.18 times a year

In year 2013 the ratio of 1.29 is more favorable for the business because the company collected their
receivables sooner than the next 2 years which have lower ratio. Higher efficiency is favorable from a cash flow
standpoint as well. If Zapatoes, Inc. can collect cash from customers sooner, it will be able to use that cash to pay
bills and other obligations sooner.
2013

The average collection period of Zapatoes at year 2013 is 282.96 days, it is unfavorable for the
business because it means the company is not able to collect receivables immediately.

2014

The average collection period of Zapatoes at year 2014 is 287.40 days from 282.96 days from
2013 it is still not unfavorable for the business because it means the company is not able to collect
receivables immediately.

2015

The average collection period of Zapatoes at year 2015 is 309.32 days. The Average Collection
Period of Zapatoes is drastically-increasing, this is unfavorable for business because it means the
company is not able to collect receivables immediately.

The Zapatoes Inc. is having trouble when it comes to their average collection period. At year
2013 their ACP is 282.96 days, the next year 2014 their ACP is 287.40 days and at year 2015 their ACP
is 309.32 Days. All of these are unfavorable for the Zapatoes Inc. A high average collection period means
that the company needs better communication with its customers regarding their debts and the company’s
expectations of payment. The worst could come in which the customer might no longer intend to pay their
debts, this is the common problems of the company.
2013

The total inventory turnover in the year of 2013 was 0.9576 or 0.96.

2014

In 2014, the total turnover was 0.8456 or 0.85.

2015

0.8677 or 0.87 in the year of 2015 was the total inventory turnover.

The inventory turnover of Zapatoes Inc. in 3 years is low as it denotes a decreasing inventory
turnover because the ideal inventory turnover of a business is 4-6. It was seen in the total inventory
turnover that every year, Zapatoes Inc. did not reach the ideal inventory turnover of a business. Meaning,
low inventory turnover ratio shows that Zapatoes Inc. may be overstocking or have deficiencies in the
product line or marketing effort.

RECOMMENDATION

Zapatoes Inc. needs to work on improving the turnover ratio. There are several ways in which the
inventory turnover ratio can be improved. First is better forecasting, the company needs to pay more
attention to forecasting techniques. If they can forecast the demands of the customer correctly, they need
to stock only those items. This will reduce the inventory levels, which in turn will increase the inventory
turnover ratio. Another way to improve the inventory turnover ratio is to increase sales. The company
needs to formulate better marketing strategies to create more demand in the industry and thus, give a push
to its sales. These could focus on advertisements or have promotional events and offers. If the company
cannot increase the demand/sales by marketing, apply the discount strategy or reduce the price to an
attractive level so as to increase the sales. For items having the lower sale, you can cut short on margin
with a permanently low price to clear the inventory faster. Lastly, it is also good to reduce purchase
quantity, it is best to devise a strategy of optimum purchase. Instead of ordering a higher quantity, it is
better to buy a lower quantity and replenish the stock once the product’s major quantity is sold. Purchase
needs to be in line with demand.
YEAR 2013

The average age of inventory for Zapatoes Inc. for the year 2013 is 380.21 days. That means it takes the
firm approximately 27 months or 2 years and 3 months to sell its inventory.

YEAR 2014

The average age of inventory for Zapatoes Inc. for the year 2014 is 429.41 days. That means it takes the
firm approximately 77 months or 6 years and 5 months to sell its inventory.

YEAR 2015

The average age of inventory for Zapatoes Inc. for the year 2015 is 419.54 days. That means it takes the
firm approximately 67 months or 5 years and 5 months to sell its inventory.

As the year passes by, the Zapatoes Inc. Average age of inventory is continuously increasing. A decreasing
average inventory period typically means that product is moving at a faster rate and an increasing average inventory
period indicates it is taking longer to sell the goods. As per Zapatoes Inc. case, their average age of inventory
indicates that they are not properly managing its inventory or that it has an inventory that is difficult to sell. It is
unfavorable to the business because obviously, a smaller average is always better than a larger one because this
means that it takes less time for the company to turn its inventory into cash. An increase in average inventory period
could signal a need for process review or slowing sales that need to be addressed.

RECOMENDATION

There are ways that can reduce the average age of inventory of Zapatoes Inc., it involves accurate sense of
what their customers will likely buy, as well as the rhythm of their purchases. Zapatoes Inc. should audit their sales
and purchasing records to identify their best-selling products and work with the sales department to ensure orders
match customer demand. They should also pare down their offerings to develop a more limited selection of items
that sell steadily rather than a broad selection of items that includes some that do not move. They can reduce order
sizes for products that are not selling and give discount to the products that have had on hand far longer than the
amount of time it typically takes to rid their stock of items.
2013

Zapatoes inc. accounts payable turnover ratio At year 2013 is 0.96, it is unfavorable for the business.

2014

At year 2014 Zapatoes Inc. accounts payable turnover ratio decreased so it is still unfavorable for the
business.

2015

Zapatoes Inc. accounts payable turnover ratio at year 2015 increased to 0.87 but still unfavorable for the
business

Accounts payable turnover is a ratio that measures the speed with which a business pays its suppliers.
Zapatoes Inc. has a low accounts payable turnover ratio in year 2013. This indicates that the business is paying its
suppliers slowly, and may be an indicator of worsening financial condition. As of year 2014, their APT decreased
and this indicates that the business is taking longer to pay off its suppliers than in previous year. In year 2015,
Zapatoes Inc. APT increased but still has less than one amount of accounts payable turnover. As with most liquidity
ratios, a higher ratio is almost always more favorable than a lower ratio. It shows suppliers and creditors that the
business pays its bills frequently and regularly.

As you can see, Zapatoes Inc. is having a difficulty in paying their suppliers on time. To improve their
APT, we recommend that Zapatoes Inc. must negotiate payment terms with their suppliers. Some suppliers offer a
discount for early payment and we suggest that Zapatoes Inc. should take advantage of early payment discounts. If
the business take advantage of these discounts, they will not only save money but will increase their accounts
payable turnover ratio automatically because it will make their payments well before the standard due date.
 2013

The average payment period of Zapatoes inc. At the year 2013 is 190.10 days, it is unfavorable and
favorable for the business

2014

The average payment period of Zapatoes inc. At the year 2014 is 258.87 days. The APP of Zapatoes Inc.
Increased from 190.10 days to 258.87 days, this is still favorable and not favorable to the business

2015

The average payment period of Zapatoes in the year 2015 is 246.62 days. Compared to the APP in the year
2013, it increases, and as for the year 2014, the APP in the year 2015 decreases. The APP for the year 2015 is still
favorable and unfavorable for Zaptoes Inc.

Zapatoes Inc. is having concerns with their average payment period. For the year 2013 their APP is 190.10
days, the next year 2014 the APP is 258.87 days, and the APP of the year 2015 is 246.62 days. All of the said
average payment periods are unfavorable for Zapatoes Inc. because taking too long to pay creditors may result in
unhappy creditors and their refusal to extend further credit or offer favorable credit terms. Besides, if the APP is too
high, it may indicate that Zapatoes Inc. is struggling to find the cash to pay its creditors. But it is also favorable
because a high average payment period is generally advantageous for a company, if the Zapatoes Inc. takes longer to
pay its creditors, their excess cash on hand could potentially be used for short-term investing activities.

RECOMMENDATION

Zapatoes Inc. should monitor their management in terms of their accounts payable because by that the
suppliers or lenders will measure how well the Zapatoes Inc. can pay its obligations. Also they should know that a
high average payment period may cause the suppliers or lenders to label Zapatoes Inc. as a bad client and impose
credit restrictions.
2013

Operating Cycle of Zaptoes Inc. at the year 2013 is shorter which means that they can quickly
convert its inventories to cash.

2014

At the year 2014 Zapatoes’ Operating Cycle takes longer which means that they are having
problems in their cash flows and it means that current assets are not being turned into cash very quickly.

2015

At the year 2015 Zapatoes’ operating cycle takes even longer which means that they can’t
efficiently use their resources to quickly turned it to cash.

The operating cycle of Zapatoes Inc. at the year 2013 is 663.17 days while at the year 2014 is 716.81 days
and at the year 2015 is 728.86 days which means Zapatoes' operating cycle is better at the year 2013 because it
means that Zapatoes Inc. were able to recover its inventory investment quickly and possesses enough cash to meet
obligations and realizes its profits quickly. But at the year 2014 and 2015 Zapatoes' operating cycle has taken longer
which means they experience cash flow problems and it takes longer for them to turn purchases into cash trough
sales and their current assets are not being turned into cash very quickly. Zapatoes Inc. is not yet an efficient
business because they can’t effectively use their resources and quickly turn it to cash which leads them often to
borrow from banks in order to pay short term liabilities.

RECOMMENDATION:

Zapatoes Inc. must improve their cash flow management, they must track the timing and amounts of cash
inflows and outflows. Collect their accounts receivable faster and disburse their accounts payable more slowly.
Zapatoes Inc. must also manage their inventory more efficiently because the quicker they sell their goods, the sooner
it takes in cash from sales.
 2013

Zapatoes Inc. Cash Conversion Cycle at year 2013 is 282.96 days which means that this is the amount of
time it takes for the firm to convert its inventory and other inputs to cash. It is unfavorable for the company because
it takes many days to receive cash from the customers after it has invested into purchasing inventory. It is also
unfavorable because it takes a lot of time to sell inventory, collect receivables and pay its bills.

2014

Zapatoes Inc. Cash Conversion Cycle at year 2014 is 292.39 days which means that this is the amount of
time it takes for the firm to convert its inventory and other inputs to cash. It is unfavorable for the company because
the days required to receive cash from the customers after it has invested into purchasing inventory is much higher
than last year. It is also unfavorable because it takes a lot of time to sell inventory, collect receivables and pay its
bills.

2015
 Zapatoes Inc. Cash Conversion Cycle at year 2015 is 309.32 days which means that this is the amount of
time it takes for the firm to convert its inventory and other inputs to cash. It is unfavorable for the company because
the days required to receive cash from the customers after it has invested into purchasing inventory is much higher
than last year. It is also unfavorable because it takes a lot of time to sell inventory, collect receivables and pay its
bills.

As year passes by, the cash conversion cycle of the Zapatoes Inc. is facing a danger because every year it is
highly increasing. At year 2013 their Cash Conversion Cycle is 282.96 days, the next year 2014 their Cash
Conversion Cycle is 292.39 days and at year 2015 their Cash Conversion Cycle is 309.32. These days means the
amount of time required for the firm to received money from the customers after it has invested into purchasing
inventory. All of these means that they are having trouble in selling their inventory, collecting their receivables and
paying their bills because they take a lot of time in order for the company convert their inventory and other inputs
into cash. Therefore, the cash conversion cycle for the year 2013, 2014 and 2015 are unfavorable for Zapatoes Inc.

RECOMMENDATION
Zapatoes Inc, must be able to create strategies in order to improve the number of days it takes the
customers to pay what they owe, the number of days it takes the business to make its product or complete its service,
the number of days the product or service sits in inventory before it is sold, the length of time that the small business
has to pay its vendors, in order for Zapatoes Inc, to have a favorable impact towards the Cash conversion cycle.
 ANSWER FOR QUESTION #3

A long-term business loan involves multi-year repayment terms following a detailed application process.
Short-term loans for businesses provide quick access to capital, sometimes in as little as 24 hours. Whether its
working capital or some other type of small business loan, the amount of money you need to borrow is probably
your top priority when looking at loans. After all, if you don’t borrow enough, you’ll end up needing another loan.
Borrow too much, and you may not be able to pay it back on time, regardless of it’s a long-term loan vs. short-term
loan. However, the length of your loan term should be one of the biggest factors you consider when shopping for a
business loan.

Choosing between short-term loans and long-term loans can affect everything from how much money you
can borrow to how much interest you’ll pay. Each source of financing has different criteria and implication on the
business. It is imperative first to take a look at the benefits as well as the costs to help the business decide which
source of funding is suitable for it. Below are the factors to consider when choosing a source of finance.

• The risk

This is a great first point because it is one of the most important factors that a business should
consider whenever they choose a source of funding. Try and imagine what would happen if the business is
unable to pay back this money. If you take a loan from a bank, look at the implications that they have
should you become incapable of paying the loan or if the business fails.

• The costs

The cost of finance is a huge factor to consider when determining the source of finance. This is
because a business wants to minimize the costs as they maximize on wealth. If shareholders see the
borrowing as something that is steering the company towards bankruptcy, then they may want something
more to compensate the risk. Understand also that there are so many costs involved in borrowing such as
the fee for the broker or interest rates. Consider all this before arriving at a decision.

• Amount needed

An important factor to consider is the amount required by the business. Some sources are not good
for a large amount of money. Some sources also are not suitable if the amount of money you are raising is
small.

• The purpose

What kind of project is this money going into? This is one of the most important things to
consider. A capital expenditure will require a long-term source of finding. Revenue expenditure, on the
other hand, will require short-term sources. An example of a capital expenditure is building a factory. The
fees given to people on the supply chain are considered as revenue expenditure.