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Working Capital – Cash

Forums › ACCA Forums › ACCA FM Financial Management Forums › Working Capital – Cash

  • This topic has 1 reply, 2 voices, and was last updated 6 years ago by Natasha.
Viewing 2 posts - 1 through 2 (of 2 total)
  • Author
    Posts
  • June 6, 2019 at 2:54 am #519271
    Renee
    Member
    • Topics: 5
    • Replies: 6
    • ☆

    Hi everyone, I came across the question below while studying, however I can’t seem to understand how to the answer is C or how to calculate it.

    A company has the following summarised Statement of Financial Position at 31 December 20X4:
    $’000
    Non?current assets 1,000
    Current assets:
    Inventories 200
    Receivables 150
    Cash 100
    –––––
    450
    Current liabilities:
    Payables 200
    –––––
    Net current assets 250
    –––––––
    1,250
    –––––––

    Over the next year the company should double its sales. The company does not plan to
    invest in any new non?current assets, but inventories, receivables and payables should all move in line with sales.

    What cash balance in one year’s time would this imply if the non?current assets were all
    land, no new capital was raised and all profits were paid out as dividends?
    A $100,000 cash in hand
    B $200,000 cash in hand
    C $50,000 overdraft
    D $100,000 overdraft

    Answer C.

    July 12, 2019 at 10:34 pm #522797
    Natasha
    Member
    • Topics: 1
    • Replies: 2
    • ☆

    There has been no additional investment in working capital as all profits made were paid as dividends, no new capital was raised and the non current asset structure is the same as previous year. It therefore means that the net current assets ( working capital) is still $250.

    Inventory 200 x 2= 400
    Receivables 150 x 2= 300
    Cash {bal fig} (50)

    Total 650

    Payable 200x 2= 400

    Net current assets: 650-400= 250

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