ACFI3422: Keener Ltd is a UK company that manufactures water bottles, it is one of the largest suppliers of these water bottles in the UK today: Liquidity and Risk Assignment, DMU, UK

Keener Ltd is a UK company that manufactures water bottles, it is one of the largest suppliers of these water bottles in the UK today. It has a year-end of 30th of November. The liquidity ratios have been calculated for the previous 2 years: –Keener has forecast the following for the year ended 30th of November 2022:

Credit management

Sales to increase to £8 million for the year to come.

Receivables are forecast to be £1,150,000.

The cost of financing receivables is covered by an overdraft at the interest rate of 5% p.a.

Keener is now considering offering a cash discount of 0.5% for payment of debts within 20 days.  It is expected that 25% of customers will take up the discount.

Inventory management

Keener is also trying to find the optimum order quantity for its inventory. The monthly demand for its inventory which costs £2.30 per unit is 80,000 units per month.  The cost per order is currently £1.25. The holding cost of 1 unit p.a. is £1.

Keener’s suppliers have offered a discount of 0.5% per unit for orders of 2,000 units or more.