management accounting - working capital Flashcards
1
Q
define working capital?
A
capital of a business used in its day-to-day trading operations
2
Q
how to calculate working capital?
A
current assets - current liabilities
3
Q
how to improve working capital?
A
- implement just-in-time
- increase sales
- reduce debtor sales
- factoring company
- increase creditor days
4
Q
what does working capital depend on?
A
- needing to hold inventories
- production lead time
- lean production
- expected credit period by customers
- credit period offered by supplies
5
Q
what are the main causes of working capital problems?
A
- poor control of inventories
- poor control of trade debtors
- ineffective use of trade creditors
- poor cashflow forecasting/unexpected events
