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The following financial information relates to Wobnig Co.

 

20X1

20X0

   

 

 $'000

 $'000

   

Revenue

14,525

10,375

   

Cost of sales

10,458

6,640

   

Profit before interest and tax

4,067

3,735

   

Interest

355

292

   

Profit before tax

3,712

3,443

   

Taxation

1,485

1,278

   

Distributable profit

2,227

2,165

   

 

       

 

 20X1

 20X0

 

 $'000

 $'000

 $'000

 $'000

Non-current assets

 

15,284

 

14,602

Current assets

 

 

 

 

Inventory

2,149

 

1,092

 

Trade receivables

3,200

 

1,734

 

 

 

5,349

 

2,826

 

 

 

 

 

Equity

 

 

 

 

Ordinary shares

8,000

 

8,000

 

Reserves

4,268

 

3,541

 

 

 

12,268

 

11,541

Non-current liabilities

 

 

 

 

7% Bonds

 

4,000

 

4,000

Current liabilities

 

 

 

 

Trade payables

2,865

 

1,637

 

Overdraft

1,500

 

250

 

 

 

4,365

 

1,887

Total equity and liabilities

 

20,633

 

17,428

Total assets

 

20,633

 

17,428

 

 
       

 

 

 

 

 

Average ratios for the last two years for companies with similar business operations to Wobnig Co are as follows:

Current ratio    

 

1.7 times

   

Quick ratio     

 

1.1 times

   

Inventory days   

 

55 days

   

Trade receivables days

 

60 days

   

Trade payables days 

 

85 days

   

Sales revenue/net working capital  10 times

   

Requirements:

a

Using suitable working capital ratios and analysis of the financial information provided, evaluate whether Wobnig Co can be described as overtrading (undercapitalized). 

Marks: 12
b

​​​​​​​Critically discuss the similarities and differences between working capital policies in the following areas:

  1. Working capital investment;
  2. Working capital financing.
Marks: 8

Answers submitted

Created by Ref Marking Action
Kamrunnahar Takia's picture
Kamrunnahar Takia
12/04/2020 - 20:46
b
10186
8
Kamrunnahar Takia's picture
Kamrunnahar Takia
12/03/2020 - 19:16
a
10184
12
Rakhi Gupta's picture
Rakhi Gupta
11/11/2020 - 13:57
a
10122
12
Rakhi Gupta's picture
Rakhi Gupta
11/11/2020 - 14:22
b
10124
8
Lokonath Debnath's picture
Lokonath Debnath
08/21/2020 - 18:00
a
9478
12
Pronob Kumer Shill's picture
Pronob Kumer Shill
03/04/2020 - 22:02
a
9048
12
Pronob Kumer Shill's picture
Pronob Kumer Shill
03/04/2020 - 22:25
b
9052
8
Pronob Kumer Shill's picture
Pronob Kumer Shill
03/04/2020 - 22:03
b
9050
8
Pronob Kumer Shill's picture
Pronob Kumer Shill
12/04/2019 - 21:47
a
8140
12
Pronob Kumer Shill's picture
Pronob Kumer Shill
12/04/2019 - 21:47
b
8398
8
Masum Billah's picture
Masum Billah
11/24/2019 - 20:09
a
8134
12
Pronob Kumer Shill's picture
Pronob Kumer Shill
11/24/2019 - 20:10
a
8138
12
Tanbirul Kabir Tanbir's picture
Tanbirul Kabir ...
11/24/2019 - 20:09
a
8132
12
Tanzeer UL Alaam's picture
Tanzeer UL Alaam
11/24/2019 - 20:08
a
8130
12
Sohel Miah's picture
Sohel Miah
10/02/2019 - 11:20
b
7502
8
Abhro Gourab Das's picture
Abhro Gourab Das
09/02/2019 - 04:00
b
7164
8
Abhro Gourab Das's picture
Abhro Gourab Das
08/11/2019 - 19:42
a
6806
12