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doubt1) “The directors have limited liability and the bank loan is secured against the general assets of the business. The directors have no outstanding guarantees on the company’s debt.”
Sir in this entire paragraph, I don’t understand the last line, which is-“The directors have no…debt”.
I tried to google the meaning of outstanding guarantees, but didn’t get a concrete answer; just ended up getting more muddled!
doubt2) Sir, this is something that i have observed in other questions too. Somehow the working capital is deemed to be equal to net current assets less cash. cash is assumed to be held constant throughout the period, with growth in rest of WC. Why is this so?
1. It simply means that the directors have no personal liability.
2. Working capital does include cash. It is less likely that the cash will need to increase, but the examiner makes it perfectly clear in his answer that including the cash in the working capital would still get full marks. (And I am interested to know which the other questions are that you refer to 🙂 )
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