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Business AS CIE

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  1. enterprise as
    6 主题
  2. business-structure as
    6 主题
  3. size-of-business as
    3 主题
  4. business-objectives as
    3 主题
  5. stakeholders-in-a-business as
    2 主题
  6. human-resource-management as
    8 主题
  7. motivation as
    4 主题
  8. management as
    2 主题
  9. the-nature-of-marketing as
    7 主题
  10. market-research as
    3 主题
  11. the-marketing-mix as
    6 主题
  12. the-nature-of-operations as
    3 主题
  13. inventory-management as
    2 主题
  14. capacity-utilisation-and-outsourcing as
    1 主题
  15. business-finance as
    2 主题
  16. sources-of-finance as
    3 主题
  17. forecasting-and-managing-cash-flows as
    1 主题
  18. costs as
    4 主题
  19. budgets as
    1 主题
  1. Business AS CIE
  2. business-finance as
  3. business-finance working-capital
课 15, 主题 2
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business-finance working-capital

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Exam code:9609

The meaning and importance of working capital

  • Working capital is the money that a business has available to fund its day-to-day activities

  • It is described as the lifeblood of a business because a lack of working capital can quickly lead to business failure if it cannot meet its immediate financial obligations

  • Working capital is a monetary value and is calculated using the formula 

Working space capital space equals space Current space assets space minus space Current space liabilities

Worked Example

Rondat Components is a heating components business based in Malmö. It has been struggling to control its level of stock

Its customers are Scandinavia’s leading gas boiler manufacturers, who require Rondat Components to supply products ‘just in time’. As a result, Rondat must hold large amounts of varied stock to ensure that customer needs can be met

Rondat Components offers its customers 90-days trade credit

 Financial Information for Rondat Components

 

2024

€m

2023

€m

Stock

8.1

7.2

Debtors

2.2

3.1

Cash

0.9

1.2

Short-term loan

6.4

4.4

Creditors

5.1

5.9

Calculate Rondat Components’ working capital in 2023 and 2024.

(3)

Step 1: Identify and calculate current assets and current liabilities for 2024 and 2023

Current assets table row cell 2024 space end cell equals cell space € 8.1 straight m space plus space € 2.2 straight m space plus space € 0.9 straight m space equals space € 11.2 straight m end cell row cell 2023 space end cell equals cell space € 7.2 straight m space plus space € 3.1 straight m space plus space € 1.2 straight m space equals space € 11.5 straight m end cell end table [1]

Current liabilities <img alt=”table row cell 2024 space end cell equals ce

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