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hi
how is overdraft level calculated?inventory +trade receivables – trade payables – net working capital???
i saw this in the answer of JUNE 2013 QUESTION 3
is this a fixed formula or it was per the question. otherwise how can i usually calculate overdraft level
please help
thank you 🙂That part of the question is really testing knowledge from Paper FA (was F3) rather than Paper FM 🙂
You can see from the question that the net working capital is the current assets minus the current liabilities (this is always the case as per standard financial accounting).
Given that the question says that the net working capital is to remain the same (so will stay at 300.8), it is a case of calculating the new figures for inventory, receivables, and payables and then the overdraft will then be the missing figure.
This is not a question of learning some special formula for Paper FM.
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