5.2e - Working Capital Flashcards
1
Q
Working capital definition
A
Cash needed to pay for day to day operations
2
Q
What does working capital cycle show?
A
How long a business has to wait to receive payment for its goods from the point where it bought the supplies to make it
3
Q
Length of working capital cycle formula
A
Length of time goods are held in stock + time taken for receivables to be paid - period of credit from suppliers
4
Q
What is the amount of working capital available to a business influenced by?
A
- Cash flow problems
- Time taken to sell stock
- Time taken for customers to pay
5
Q
Over-investment in capacity definition
A
When a business spends too much on fixed assets
6
Q
Trade debtors definition
A
Customers who buy on credit
7
Q
Overtrading definition
A
When a business expands too quickly and puts pressure on short-term finance
