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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 2 years ago by John Moffat.
Viewing 4 posts - 1 through 4 (of 4 total)
  • Author
    Posts
  • September 29, 2022 at 9:07 am #667503
    AliSher123
    Participant
    • Topics: 24
    • Replies: 13
    • ☆

    A company has annual credit sales of $27 million and related cost of sales of $15 million. The company has the following targets for the next year:
    Trade receivables days 50 days
    Inventory days 60 days
    Trade payables 45 days
    Assume there are 360 days in the year.
    What is the net investment in working capital required for the next year?

    A. $8,125,000
    B. $4,375,000
    C. $2,875,000
    D. $6,375,000

    We can easily find out the trade rec and inventory
    How can we find the trade payables ? If we are not given credit purchases ? In marking scheme they have used 15m as credit purchases
    to find trade payables

    September 29, 2022 at 3:43 pm #667537
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    We have to make the best use of the information available.

    Here we have no choice but to assay that the credit purchases are the same as the cost of sales.

    September 30, 2022 at 10:26 am #667589
    AliSher123
    Participant
    • Topics: 24
    • Replies: 13
    • ☆

    But that makes no sense

    September 30, 2022 at 6:15 pm #667604
    John Moffat
    Keymaster
    • Topics: 57
    • Replies: 54665
    • ☆☆☆☆☆

    Why does it make no sense? Exactly what else are you going to assume?

  • Author
    Posts
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