Theory question 108
Business CalculationsCommerce 2 (theory)
The following extracts were taken from the books of Teesan Enterprise on 31st October 2010:
Cash in hand – Le 6,750
Stock of raw materials – Le 12,000
Trade debtors – Le 30,000
Plant and Machinery – Le 72,000
Motor van – Le 31,000
Loan – Le 50,000
Trade creditors – Le 43,000
Calculate:
(a) Liquid capital
(b) Fixed assets
(c) Teesan Enterprises' capital
(d) Working capital.
Show the model answer
(a) Liquid capital (liquid assets) = cash + debtors = 6,750 + 30,000 = Le 36,750.
(b) Fixed assets = plant and machinery + motor van = 72,000 + 31,000 = Le 103,000.
(c) Total assets = 103,000 + 12,000 + 30,000 + 6,750 = Le 151,750; total liabilities = loan 50,000 + creditors 43,000 = Le 93,000; capital = 151,750 − 93,000 = Le 58,750.
(d) Current assets = 12,000 + 30,000 + 6,750 = Le 48,750; working capital = 48,750 − 43,000 = Le 5,750.
Liquid capital counts only cash and debtors (stock is left out); show each formula before the figures.