Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Net working capital increase
- This topic has 3 replies, 3 voices, and was last updated 6 years ago by John Moffat.
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- February 20, 2018 at 9:54 pm #438157
Hiya
PLs can you clarify:
Q: G’s net working capital is most likely to increase in which of the following situations?
-Payments to suppliers are delayed
-period of credit to customers is reduced
-non current assets are sold
– inventory levels are increasedA: if non current assets are sold.
Can you explain why this would be the only likely reason to increase the net working capital?
Thanks 🙂
February 21, 2018 at 10:39 am #438216If payments to suppliers are delayed, then payables increase and therefore WC will decrease.
If period of credit to customers is reduced, then receivables decrease and therefore WC will decrease.
If inventory levels are increased then either payables will increase (if bought on credit) or cash will decrease (if bought for cash). In both cases, WC will therefore not change.
If non-current assets are sold, then cash increases and therefore WC increases.
August 30, 2018 at 8:54 am #470106Why an increase in cash increases WC,because CA-LL=WC,IF we increase CA(Cash),the answer will be a smaler WC,PLEASE Help
August 30, 2018 at 11:25 am #470150Working capital is current assets less current liabilities.
Cash is a current asset. If cash is higher then working capital is higher.
Have you actually watched my free lectures on this??
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