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The following financial information relates to Wobnig Co.
|
20X1 |
20X0 |
||||
|
|
$'000 |
$'000 |
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Revenue |
14,525 |
10,375 |
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|
Cost of sales |
10,458 |
6,640 |
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Profit before interest and tax |
4,067 |
3,735 |
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Interest |
355 |
292 |
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Profit before tax |
3,712 |
3,443 |
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Taxation |
1,485 |
1,278 |
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Distributable profit |
2,227 |
2,165 |
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|
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|
20X1 |
20X0 |
|||
|
|
$'000 |
$'000 |
$'000 |
$'000 |
|
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Non-current assets |
|
15,284 |
|
14,602 |
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Current assets |
|
|
|
|
|
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Inventory |
2,149 |
|
1,092 |
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Trade receivables |
3,200 |
|
1,734 |
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|
|
|
|
5,349 |
|
2,826 |
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Equity |
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|
|
|
|
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Ordinary shares |
8,000 |
|
8,000 |
|
|
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Reserves |
4,268 |
|
3,541 |
|
|
|
|
|
12,268 |
|
11,541 |
|
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Non-current liabilities |
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|
|
|
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7% Bonds |
|
4,000 |
|
4,000 |
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Current liabilities |
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|
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Trade payables |
2,865 |
|
1,637 |
|
|
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Overdraft |
1,500 |
|
250 |
|
|
|
|
|
4,365 |
|
1,887 |
|
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Total equity and liabilities |
|
20,633 |
|
17,428 |
|
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Total assets |
|
20,633 |
|
17,428 |
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Average ratios for the last two years for companies with similar business operations to Wobnig Co are as follows: |
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|
Current ratio |
|
1.7 times |
|||
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Quick ratio |
|
1.1 times |
|||
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Inventory days |
|
55 days |
|||
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Trade receivables days |
|
60 days |
|||
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Trade payables days |
|
85 days |
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Sales revenue/net working capital 10 times |
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Requirements:
Using suitable working capital ratios and analysis of the financial information provided, evaluate whether Wobnig Co can be described as overtrading (undercapitalized).
Critically discuss the similarities and differences between working capital policies in the following areas:
- Working capital investment;
- Working capital financing.
Answers submitted
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b 10186 |
8 | |
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a 10184 |
12 | |
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a 10122 |
12 | |
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b 10124 |
8 | |
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a 9478 |
12 | |
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a 9048 |
12 | |
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b 9052 |
8 | |
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b 9050 |
8 | |
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a 8140 |
12 | |
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b 8398 |
8 | |
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a 8134 |
12 | |
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a 8138 |
12 | |
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a 8132 |
12 | |
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a 8130 |
12 | |
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b 7502 |
8 | |
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b 7164 |
8 | |
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a 6806 |
12 |
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