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If a firm has 100 in inventories a current ratio equal to 1.2 and quick ratio equal to 1.1 what is the firm net working capital?
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Difference between working capital and capital employed?
Capital EmployedTotal resources are also known as total capital employed and sometimes as gross capital employed or total assets before depreciation. Thus total capital consists of all assets fixed and current. In other words, the total of the assets side of the balance sheet is considered as total assets employed.While calculating capital employed on the basis of assets, following points must be noted.* Any asset which is not in use should be excluded.* Intangible assets like goodwill, patents, trademarks etc should be excluded. If they have some potential sales value, they should be included.* Investments which are not concerned with business, should be excluded* Fictitious assets are to be excludedWorking CapitalWorking capital is defined as the excess of current assets over current liabilities. Current assets are those assets which will be converted into cash within the current accounting period or within the next year as a result of the ordinary operations of the business. They are cash or near cash resources. These include:* Cash and Bank balances* Receivables* Inventory· Raw materials, stores and spares· Work-in-progress· Finished goods* Prepaid expenses* Short-term advances* Temporary investmentThe value represented by these assets circulates among several items. Cash is used to buy raw materials, to pay wages and to meet other manufacturing expenses. Finished goods are produced. These are held as inventories. When these are sold, accounts receivables are created. The collection of accounts receivables brings cash into the firm. The cycle starts again.Current liabilities are the debts of the firms that have to be paid during the current accounting period or within a year. These include:* Creditors for goods purchased* Outstanding expenses i.e., expenses due but not paid* Short-term borrowings* Advances received against sales* Taxes and dividends payable* Other liabilities maturing within a yearWorking capital is also known as circulating capital, fluctuating capital and revolving capital. The magnitude and composition keep on changing continuously in the course of business.Permanent and Temporary Working CapitalConsidering time as the basis of classification, there are two types of working capital viz, 'Permanent' and 'Temporary'. Permanent working capital represents the assets required on continuing basis over the entire year, whereas temporary working capital represents additional assets required at different items during the operation of the year. A firm will finance its seasonal and current fluctuations in business operations through short term debt financing. For example, in peak seasons more raw materials to be purchased, more manufacturing expenses to be incurred, more funds will be locked in debtors balances etc. In such times excess requirement of working capital would be financed from short-term financing sources.The permanent component current assets which are required throughout the year will generally be financed from long-term debt and equity. Tandon Committee has referred to this type of working capital as 'Core Current Assets'. Core Current Assets are those required by the firm to ensure the continuity of operations which represents the minimum levels of various items of current assets viz., stock of raw materials, stock of work-in-process, stock of finished goods, debtors balances, cash and bank etc. This minimum level of current assets will be financed by the long-term sources and any fluctuations over the minimum level of current assets will be financed by the short-term financing. Sometimes core current assets are also referred to as 'hard core working capital'.The management of working capital is concerned with maximizing the return to shareholders within the accepted risk constraints carried by the participants in the company. Just as excessive long-term debt puts a company at risk, so an inordinate quantity of short-term debt also increases the risk to a company by straining its solvency. The suppliers of permanent working capital look for long- term return on funds invested whereas the suppliers of temporary working capital will look for immediate return and the cost of such financing will also be costlier than the cost of permanent funds used for working capital.Gross Working CapitalGross Working Capital is equal to total current assets only. It is identified with current assets alone. It is the value of non-fixed assets of an enterprise and includes inventories (raw materials, work-in-progress, finished goods, spares and consumable stores), receivables, short-term investments, advances to suppliers, loans, tender deposits, sundry deposits with excise and customs, cash and back balances, prepaid expenses, incomes receivable, etc.Gross Working Capital indicated the quantum of working capital available to meet current liabilities.Thus, Gross Working Capital = Current AssetsNet Working CapitalNet Working Capital is the excess of current assets over current liabilities, i.e. current assets less current liabilities.This concept of working capital is widely accepted. This approach, however, does not reflect the exact position of working capital due to the following factors:* Valuation of inventories include write-offs* Debtors include the profit element* Debts outstanding for more than a year likewise debtors which are doubtful or not provided for are included as asset are also placed under the head 'current assets'* Non-moving and slow-moving items of inventories are also included in inventories, and* Write-offs and the profits do not involve cash outflowTo assess the real strength of working capital position, it is necessary to exclude the non-moving and obsolete items from inventories. Working Capital thus arrived at is termed as 'Tangible Working Capital.'
Ace industries has current assets equal to 3 million dollars The company's currerrent ratio is 1.5'and itsquick ratio is 1.o. what is the firm's level of current liabilities .what isinventories.?
If assets are 3 million and the current ratio is 1.5, the liabilities are 2 million. (current assets = 3 million/ current liabilities of 2 million = 1.5 current ratio.) Inventories have to be 1 million. The quick ratio is current assets = 3 million - 1 million inventory / current liabilities of 2 million equal a quick ratio of 1.
What is the difference between fund flow statement and cash flow statement?
nothing both r similarAlternate answer:The fund flow statement shows the sources and uses of working capital. Working capital equals current assets minus current liabilities (usually excluding the short term portion of interest bearing debt). The cash flow statement explains the change in cash (and cash equivalents), by showing the change in cash as a result of operating, investing and financing activities. The sum of these equal the change in cash over the period.An important difference is that working capital is broader than 'just' cash (and cash equivalents). For example, working capital can increase even though cash is decreasing (for example when the increase in inventory and accounts receivables is larger than the cash decline).Nowadays companies provide a cash flow statement.
What is contributed capital?
Capital received from investors for stock, equal to capital stock plus contributed capital. also called contributed capital. also called paid-in capital.
What accounts would appear in the balance sheet?
The asset(e.g.cash, marketable securities, accounts receivable, inventories, land, building, etc..) , liabilities(e.g.accounts payable, notes payable, accruals, mortgage payable, etc..), and equity accounts (e.g.ordinary share capital, preference share capital, ordinary share premium, preference share premium, retained earnings.. etc.) appear in a balance sheet. As it is called balance sheet, the asset accounts must be equal with the liabilities and equity accounts (asset = liabilities + capital).
Why gross working capital is equal to current assets?
Gross working capital is the amount which is equal to current assets which are available for day to day working but net working capital is that amount which remains after deducting current liabilities from current assets it means that amount which even remains after deducting current liabilities.
Current assets 150000Rs Current Liabilities 75000Rs Promoters contribute 80 of working capital.calculate incremental capital equired.?
The working capital is calculated as Current Assets minus Current Liabilities, which is Rs. 75,000. Since the Promoters contribute 80% of the working capital, the incremental capital required would be 20% of Rs. 75,000, which is Rs. 15,000. Therefore, the incremental capital required would be Rs. 15,000.
Capital Employed is equal to?
Capital Employed = Fixed assets + current assets - current Liabilities
Difference between working capital and capital employed?
Capital EmployedTotal resources are also known as total capital employed and sometimes as gross capital employed or total assets before depreciation. Thus total capital consists of all assets fixed and current. In other words, the total of the assets side of the balance sheet is considered as total assets employed.While calculating capital employed on the basis of assets, following points must be noted.* Any asset which is not in use should be excluded.* Intangible assets like goodwill, patents, trademarks etc should be excluded. If they have some potential sales value, they should be included.* Investments which are not concerned with business, should be excluded* Fictitious assets are to be excludedWorking CapitalWorking capital is defined as the excess of current assets over current liabilities. Current assets are those assets which will be converted into cash within the current accounting period or within the next year as a result of the ordinary operations of the business. They are cash or near cash resources. These include:* Cash and Bank balances* Receivables* Inventory· Raw materials, stores and spares· Work-in-progress· Finished goods* Prepaid expenses* Short-term advances* Temporary investmentThe value represented by these assets circulates among several items. Cash is used to buy raw materials, to pay wages and to meet other manufacturing expenses. Finished goods are produced. These are held as inventories. When these are sold, accounts receivables are created. The collection of accounts receivables brings cash into the firm. The cycle starts again.Current liabilities are the debts of the firms that have to be paid during the current accounting period or within a year. These include:* Creditors for goods purchased* Outstanding expenses i.e., expenses due but not paid* Short-term borrowings* Advances received against sales* Taxes and dividends payable* Other liabilities maturing within a yearWorking capital is also known as circulating capital, fluctuating capital and revolving capital. The magnitude and composition keep on changing continuously in the course of business.Permanent and Temporary Working CapitalConsidering time as the basis of classification, there are two types of working capital viz, 'Permanent' and 'Temporary'. Permanent working capital represents the assets required on continuing basis over the entire year, whereas temporary working capital represents additional assets required at different items during the operation of the year. A firm will finance its seasonal and current fluctuations in business operations through short term debt financing. For example, in peak seasons more raw materials to be purchased, more manufacturing expenses to be incurred, more funds will be locked in debtors balances etc. In such times excess requirement of working capital would be financed from short-term financing sources.The permanent component current assets which are required throughout the year will generally be financed from long-term debt and equity. Tandon Committee has referred to this type of working capital as 'Core Current Assets'. Core Current Assets are those required by the firm to ensure the continuity of operations which represents the minimum levels of various items of current assets viz., stock of raw materials, stock of work-in-process, stock of finished goods, debtors balances, cash and bank etc. This minimum level of current assets will be financed by the long-term sources and any fluctuations over the minimum level of current assets will be financed by the short-term financing. Sometimes core current assets are also referred to as 'hard core working capital'.The management of working capital is concerned with maximizing the return to shareholders within the accepted risk constraints carried by the participants in the company. Just as excessive long-term debt puts a company at risk, so an inordinate quantity of short-term debt also increases the risk to a company by straining its solvency. The suppliers of permanent working capital look for long- term return on funds invested whereas the suppliers of temporary working capital will look for immediate return and the cost of such financing will also be costlier than the cost of permanent funds used for working capital.Gross Working CapitalGross Working Capital is equal to total current assets only. It is identified with current assets alone. It is the value of non-fixed assets of an enterprise and includes inventories (raw materials, work-in-progress, finished goods, spares and consumable stores), receivables, short-term investments, advances to suppliers, loans, tender deposits, sundry deposits with excise and customs, cash and back balances, prepaid expenses, incomes receivable, etc.Gross Working Capital indicated the quantum of working capital available to meet current liabilities.Thus, Gross Working Capital = Current AssetsNet Working CapitalNet Working Capital is the excess of current assets over current liabilities, i.e. current assets less current liabilities.This concept of working capital is widely accepted. This approach, however, does not reflect the exact position of working capital due to the following factors:* Valuation of inventories include write-offs* Debtors include the profit element* Debts outstanding for more than a year likewise debtors which are doubtful or not provided for are included as asset are also placed under the head 'current assets'* Non-moving and slow-moving items of inventories are also included in inventories, and* Write-offs and the profits do not involve cash outflowTo assess the real strength of working capital position, it is necessary to exclude the non-moving and obsolete items from inventories. Working Capital thus arrived at is termed as 'Tangible Working Capital.'
Why Having Positive Working Capital Is Essential?
Positive working capital is essential for your small business to constantly fulfill its operational requirements. The availability of working capital influences your small business’ potential to meet its debt obligations, as well as remain financially workable. In case your current assets do not equal or exceed your current liabilities, you run the risk of being unable to pay lenders in a timely manner.
Net Invested Assets minus Net Invested Liabilities is equal to?
net working capital
What is the relationship between capital account balance and current account balance?
The balance of payments, then, is the sum of the balance on current account and the balance on capital and financial account. It is important to understand that the deficit indicated by the current account is financed through activities recorded on the capital and financial account. The deficit on the current account must be exactly offset by the surplus on the capital and financial account (if it is not, net errors and omissions will correct it). This means then that the sum of the current account and the capital and financial account is equal to zero.
Ace industries has current assets equal to 3 million dollars The company's currerrent ratio is 1.5'and itsquick ratio is 1.o. what is the firm's level of current liabilities .what isinventories.?
If assets are 3 million and the current ratio is 1.5, the liabilities are 2 million. (current assets = 3 million/ current liabilities of 2 million = 1.5 current ratio.) Inventories have to be 1 million. The quick ratio is current assets = 3 million - 1 million inventory / current liabilities of 2 million equal a quick ratio of 1.
What is the difference between fund flow statement and cash flow statement?
nothing both r similarAlternate answer:The fund flow statement shows the sources and uses of working capital. Working capital equals current assets minus current liabilities (usually excluding the short term portion of interest bearing debt). The cash flow statement explains the change in cash (and cash equivalents), by showing the change in cash as a result of operating, investing and financing activities. The sum of these equal the change in cash over the period.An important difference is that working capital is broader than 'just' cash (and cash equivalents). For example, working capital can increase even though cash is decreasing (for example when the increase in inventory and accounts receivables is larger than the cash decline).Nowadays companies provide a cash flow statement.
What happens if you wire a ground and neutral wire together in an outlet box?
If there is a GFCI in the circuit it will stop working correctly. They compare ground current to neutral current to detect a fault. It makes ground current equal to neutral current which is a fault condition.
Is there a capital letter after a equal sign?
No, there is no need for a capital letter after an equal sign in most cases. The convention is to start a new sentence with a capital letter and not necessarily after an equal sign within a sentence.
What is contributed capital?
Capital received from investors for stock, equal to capital stock plus contributed capital. also called contributed capital. also called paid-in capital.
