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Hi sir,
To calculate working capital, we will use (inventory + trade receivables) – trade payables
Is working capital consists of only these 3 components? what about components such as cash (current asset), interest payable, overdraft (current liability)? should i include them as well? because I’ve come across one past year question (Dec 2003), where the answers suggested that cash should be included. But the past year question 1 Dec 2009 answers suggested that cash should not form part of the working capital. Whereas BPP study text explains that Working Capital is derived from (all components under current assets minus all components under current liabilities). There are inconsistencies among them and it really makes me confused.
Sir, please give me guidance regarding this matter. thanks in advance.
Best regards,
Esther Pang
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