Exam 21: Management of Working Capital

Aziz Ltd made sales of £2 344000 in the 20X1 financial year, of which 42% were on credit. The average debtor's figure over that period was £1 455 630. What was the debtor's collection period in months (to one decimal place)?

Barbara buys a fixed asset for £7000 for use in her business. She pays for it out of the business bank account. Which one of the following statements is correct?

Which of the following statements is correct? Stock turnover ratio in months is calculated as:

The following is an extract from Ian’s balance sheets at 31 December 20X1 and 20X2 shows the following information about net current assets: Which one of the following statements is correct?

The following is an extract from Colin's balance sheets at 30 June 20X1 and 20X2: Which one of the following statements is correct? During the financial year ended 30 June 20X4

A decision to increase the credit given to customers is kely to increase the level of receivables and increase in the volume of sales.

Which one of the following transactions increases a business's working capital?

Ewan Ltd makes an operating profit of £37000 in its financial year ended 31 December 20X1, after charging £15 800 in depreciation for the year The business's net change in working capital (stock, debtors and creditors) was a cash outflow of £3500. What was the net cash inflow from operating activities for the year ended 31 December 20X1?

Overtrading is when the business is trading at a level that cannot sustain profitability.

Working capital is the difference between current assets and current liabilities.

The following information is available for Katherine Ng Products for the 20X1 financial year: £ Average trade creditors 98 400 Purchases 723 675 Cost of sales 662 450 Turnover 847 220 Average stock 86 240 What is the creditors' turnover period in days (to one decimal place)?

Grunweld Ltd extract of financial information for the 20X1 is as follows: £ Purchases 772 660 Expenses 115 500 Cost of sales 800000 Opening stock 75 600 Closing stock 85 440 What is the company's stock turnover ratio in days (to one decimal place)?

A negative working capital means that current assets are fully financing current liabilities.

The nature of working capital will vary depending upon the needs of the business.

In the context of working capital the opportunity cost is represented by the investment into current assets

The maintenance of a cash balance is an investment by the company.

Which one of the following transactions decreases a business's working capital?

Current assets represent assets held in the short term to finance current liabilities.

The working capital cycle is the period of time from the investment into current assets to the inflow of cash derived from the investment.

The following extracts come from Ben’s balance sheets at 31 May 20X1 and 20X2 are as follows: Three of the following six statements are correct: Between 20X1 and 20X2: 1. There has been a decrease in working capital. 2. There has been an increase in working capital. 3. There has been a cash outflow in respect of debtors. 4. There has been a cash inflow in respect of debtors. 5. There has been a cash inflow in respect of stock. 6. There has been a cash outflow in respect of stock. Which three statements are correct?