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Working Capital

Forums › Ask ACCA Tutor Forums › Ask the Tutor ACCA FM Exams › Working Capital

  • This topic has 3 replies, 2 voices, and was last updated 1 year ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • May 24, 2021 at 3:41 am #621565
    Nikitagarwal
    • Topics: 154
    • Replies: 146
    • ☆☆☆

    Hello Sir,
    Hope you are keeping well and safe!

    I was working on the ratio’s and in Inventory turnover period we calculate it by Avg Inventory divided by COS , so in BPP Text book , question starts with :
    20X3 20X2
    $m $m
    Sales revenue 2,065.0 1,788.7
    Cost of sales 1,478.6 1,304.0
    Gross profit 586.4 484.7
    Current assets
    Inventories 119.0 109.0

    For average inventory should we calculate it by (119+109)/2 , they have considered only closing inventory, can you please further explain why ?

    Thanks in adance!

    May 24, 2021 at 6:59 am #621579
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49603
    • ☆☆☆☆☆

    If we could calculate the average inventory for both year then we would use that. However that is not possible here – we can do it for 20X3 but do not have the information for 20X2. So to be comparing like with like we use the closing inventory (as is the case for most things usually as I explain in my free lectures).

    May 24, 2021 at 3:52 pm #621645
    Nikitagarwal
    • Topics: 154
    • Replies: 146
    • ☆☆☆

    aah,, got it now…
    Thanks !

    May 24, 2021 at 4:04 pm #621648
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 49603
    • ☆☆☆☆☆

    You are welcome 🙂

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    Posts
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