Non current assets: 43,570 Current assets: 18,700 Non current liabilities: 5,000 Current liabilities: 8,900 Additional information: Cash E300 taken by Magwegwe for own use was completely omitted in the books. REQUIRED: (d) Calculate Magwegwe's working capital as at 30 September 2018. Show your working.
Answer (1)
To calculate Magwegwe's working capital as of 30 September 2018, you should first understand that working capital is a measure of a company's short-term financial health and operational efficiency. It is calculated as the difference between current assets and current liabilities.
Here are the steps to find the working capital:
Identify Current Assets: These are assets that are expected to be converted into cash, sold, or consumed within a year. From the information given, Magwegwe's current assets are $18,700.
Identify Current Liabilities: These are obligations that the company needs to settle within a year. According to the problem, current liabilities are $8,900.
Account for the Withdrawal: The additional information states that $300 cash was taken by Magwegwe for personal use and was not accounted for in the books. Therefore, we need to adjust the current assets by reducing them by $300 because this amount is no longer available to the business.
Adjusted current assets = $18,700 - $300 = $18,400
Calculate Working Capital:
Working Capital = Current Assets − Current Liabilities
Substitute the adjusted current assets and current liabilities into the formula:
Working Capital = $18 , 400 − $8 , 900
Working Capital = $9 , 500
Therefore, Magwegwe's working capital as of 30 September 2018 is $9,500.
