XYZ Limited is a medium sized manufacturing business

which makes and sells products to a range of industrial

customers who use XYZ’s products in their own

products. The working capital of XYZ is typical of a

manufacturing organisation in that at any point in time

they have cash, trade receivables, inventories of raw

materials, work in progress and finished goods and

trade payables. The Managing Director of XYZ

Limited believes that all parts of the working capital

cycle could be improved and has asked you to

produce a report which discusses how each part of the

working capital cycle could be improved and which

critically evaluates the implications of the improvements

on XYZ and other connected parties (for example

trade receivables and trade payables).
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Question 2
Many organisations use transfer pricing when

transferring products between different divisions of the

same organisation. You are required to discuss in detail

the advantages and disadvantages of each of the

following four methods:
1) Market based transfer prices;
2) Full cost transfer prices;