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December 2013 Q:1 (WC)

MMarina10y ago
Dear Tutor, I have noticed that the examiner has included the recover of the WC in year 3 and 4. Would it be acceptable if we consider the whole amount at the end of year 3?
John MoffatJohn MoffatTutor10y ago#1
No, it would not be acceptable. It is because the working capital at the start of each year has to be 10% of the sales revenue for the year. So every year the working capital needs adjusting - either higher or lower - to become 10%. It is only in the final year that the final amount of working capital is recovered.
MMarina10y ago#2
I read once again the question and looked at the answer. Do I understand right that in this question WC won't be recovered in the final year?
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