Working capital

Question 1

Ratios P1

Answer 1

1. Working capital ratio
   Current assets: Current liabilities
2. Quick ratio
   (Current assets – Inventory): Current liabilities
3. Debtors collection period
   Trade debtors / Credit sales x 365
4. Creditors payment period
   Trade creditors / Credit purchases(Use C/B if no info given for O/B) x 365

Question 2

Ratios P2

Answer 2

1. Inventory turnover (IT)
   CoS / Ave. inventory OR 365 ÷ ID
2. Inventory days (ID)
   Inventory / CoS x 365 OR 365 ÷ IT
3. Raw material days
   RM Inventory / RM purchases x 365
4. WIP days
   WIP Inventory / Cost of sales x 365
5. Finished goods days
   Finished goods inventory / Cost of sales x 365