How to calculate working capital & working capital cycle. Working Capital Management

1. Managing Resources Net Working Capital Working Capital Cycle Maroof Hussain Sabri

4. Working Capital Definition Current Assets minus Current Liabilities Capital tied up in the business for day to day operating requirements Maroof Hussain Sabri

7. Cost of Goods Sold Model Beginning inventory £20 Purchases £100 Maroof Hussain Sabri Cost of goods available for sale £120 Ending inventory £30 Cost of goods sold £90

11. Using Financial Statements for Decision Making Inventory turnover = Cost of goods sold ÷ Average inventory Gross profit percentage = Gross profit ÷ Net sales revenue Maroof Hussain Sabri

13. The Working Capital Cycle Finished Goods Work in Progress Cash Sales Trade Debtors Cash Bank Overdraft Raw Materials Trade Creditors Maroof Hussain Sabri

15. Short Term Investments Maroof Hussain Sabri

18. Reporting on the Balance Sheet and Income Statement Balance Sheet Current Assets: $ XXX Cash XXX Short-term investments at market value 102,000 Accounts receivable XXX Income Statement Revenues $ XXX Expenses XXX Other revenues, gains, and (losses): Interest revenue XXX Dividend revenue 4,000 Unrealized gain on investment 2,000 Maroof Hussain Sabri

19. Accounts Receivable Maroof Hussain Sabri

24. Notes Receivable PROMISSORY NOTE £1,000 August 31, 2005 Amount For value received, I promise to pay to the order of Lloyds Bank plc London One thousand and no/100………… …………D ollars on February 28, 2006 plus interest at the annual rate of 9 percent pa Interest period starts Payee (creditor) Interest rate Interest period ends on the maturity date Maker (Debtor) Maroof Hussain Sabri

27. Current Liabilities Maroof Hussain Sabri

36. Accrued Expenses These are expenses that have been incurred but not recorded . Salaries Taxes withheld Interest Utilities Maroof Hussain Sabri

39. Working Capital Requirement Calculation Maroof Hussain Sabri

40. Is it too late to do some individual work? Maroof Hussain Sabri

41. Is it too late to do some individual work Maroof Hussain Sabri

42. Using Financial Statements for Decision Making Debtors turnover = Sales Revenue ÷ Average Trade Debtors Days Creditors Outstanding = 365 ÷ (Credit Purchases ÷ Average Trade Creditors) Maroof Hussain Sabri

43. Using Financial Statements for Decision Making Maroof Hussain Sabri