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OKAN CO (SEP/DEC 19)

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA AFM Exams › OKAN CO (SEP/DEC 19)

  • This topic has 3 replies, 2 voices, and was last updated 9 months ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
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  • April 10, 2022 at 8:23 am #652968
    Frooti
    Participant
    • Topics: 80
    • Replies: 75
    • ☆☆

    Working capital (1,733) (2,547) (4,288) 4,360 4,208

    Pls explain this calcultion part

    April 10, 2022 at 9:27 am #652979
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    The question says that the initial working capital is 10% of the year 1 sales revenue. Therefore the working capital at time 0 is 10% x 17325 = 1,733.

    The question also says that there will be an increase or reduction in working capital of 15% for every $1 increase or decrease in sales revenue.

    The revenue in the second year is 34304 which is an increase of 34304 – 17325 = 16979.
    Therefore extra working capital is needed at time 1 of 15% x 16979 = 2,547.

    The revenue in the third year is 62,980 which is an increase of 62890 – 34304 = 28586.
    Therefore extra working capital is needed at time 2 of 15% x 28586 = 4,288.

    It is the same workings for the remaining years.

    April 13, 2022 at 5:06 am #653199
    Frooti
    Participant
    • Topics: 80
    • Replies: 75
    • ☆☆

    I guess my last amount came something else

    April 13, 2022 at 8:29 am #653220
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 51543
    • ☆☆☆☆☆

    In the final year we get back any remaining working capital (as is always the case).

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