Reference no: EM132620126

Asjid works in UBL credit department. One of his clients Shehryar Corporation recently submitted an application for Rs. 10,00,000 three year loan. From Past experience with this corporation Asjid knows that he had to face difficulties collecting credit from Shahryar Corporation and have periodically been forced to deal with late and missed payments attributed to cash flow problems. Thus you are surprised to see in the business plan accompanying the application that the management expects to reduce the company s operating cycle from 190 days to 90 days. A footnote to the business plan indicates that the reduction in the operating cycle will result from a tighter credit policy and the implementation of a just-in-time inventory system.

Requirement:

Question 1: Would the company be able to reduce the operating cycle by applying the new strategy and would you give the loan to the company on this basis?