A) Calculate the total purchases b) Calculate the creditors payment period in days c) Explain how the decision could affect the daily operations of the business.

Cash purchases represent 30% of total purchases.
Let $TP$ be the total purchases.

$$R216\,000 = 0.30 \times TP$$

$$TP = \frac{R216\,000}{0.30}$$ $$TP = R720\,000$$

The total purchases are $\boxed{\text{R720 000}}$.

2.2.2 Calculate the creditors' payment period in days.

Credit purchases are the total purchases minus cash purchases.

$$\text{Credit Purchases} = \text{Total Purchases} - \text{Cash Purchases}$$ $$\text{Credit Purchases} = R720\,000 - R216\,000$$ $$\text{Credit Purchases} = R504\,000$$

Average creditors are the sum of opening and closing creditors divided by two.

$$\text{Average Creditors} = \frac{\text{Opening Creditors} + \text{Closing Creditors}}{2}$$ $$\text{Average Creditors} = \frac{R140\,000 + R160\,000}{2}$$ $$\text{Average Creditors} = \frac{R300\,000}{2}$$ $$\text{Average Creditors} = R150\,000$$

The formula for creditors' payment period is:

$$\text{Creditors' Payment Period} = \frac{\text{Average Creditors}}{\text{Credit Purchases}} \times 365 \text{ days}$$ $$\text{Creditors' Payment Period} = \frac{R150\,000}{R504\,000} \times 365 \text{ days}$$ $$\text{Creditors' Payment Period} \approx 0.297619 \times 365 \text{ days}$$ $$\text{Creditors' Payment Period} \approx 108.62 \text{ days}$$

The creditors' payment period is approximately $\boxed{\text{108.62 days}}$.

2.2.3 Explain how this decision could affect the daily operations of the business. Provide TWO points.

• The business may experience stock shortages as it cannot acquire necessary inventory on credit. This could lead to an inability to meet customer demand, resulting in lost sales and customer dissatisfaction.
• The business will face significant cash flow strain as it will be forced to make all future purchases in cash. This could deplete cash reserves, making it difficult to pay other operating expenses or even leading to liquidity problems.