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    Current Assets &working Cap

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    RAW Saibot
    The document discusses current assets, current liabilities, and how they relate to the current ratio and working capital of a business. It provides examples of current assets like cash, accounts receivable, and inventory. Current liabilities include accounts payable, loans, and expenses due within one year. The current ratio is calculated by dividing current assets by current liabilities and indicates a company's ability to pay short-term debts. Working capital is equal to current assets minus current liabilities and represents the capital available for day-to-day business operations.

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    Current Assets &working Cap

    Uploaded by

    RAW Saibot
    5 views3 pages
    The document discusses current assets, current liabilities, and how they relate to the current ratio and working capital of a business. It provides examples of current assets like cash, accounts receivable, and inventory. Current liabilities include accounts payable, loans, and expenses due within one year. The current ratio is calculated by dividing current assets by current liabilities and indicates a company's ability to pay short-term debts. Working capital is equal to current assets minus current liabilities and represents the capital available for day-to-day business operations.

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    Capital

    Original Title

    CURRENT ASSETS &WORKING CAP

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    The document discusses current assets, current liabilities, and how they relate to the current ratio and working capital of a business. It provides examples of current assets like cash, accounts receivable, and inventory. Current liabilities include accounts payable, loans, and expenses due within one year. The current ratio is calculated by dividing current assets by current liabilities and indicates a company's ability to pay short-term debts. Working capital is equal to current assets minus current liabilities and represents the capital available for day-to-day business operations.

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    © All Rights Reserved
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    5 views3 pages

    Current Assets &working Cap

    Uploaded by

    RAW Saibot
    The document discusses current assets, current liabilities, and how they relate to the current ratio and working capital of a business. It provides examples of current assets like cash, accounts receivable, and inventory. Current liabilities include accounts payable, loans, and expenses due within one year. The current ratio is calculated by dividing current assets by current liabilities and indicates a company's ability to pay short-term debts. Working capital is equal to current assets minus current liabilities and represents the capital available for day-to-day business operations.

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    of 3

    CURRENT ASSETS CURRENT LIABILITIES

    WHAT CONVERT IN CASH IN 1 YEAR HAVE TO PAY IN 1 YEAR


    EXMPLES CASH&CASH EQUIVALENTS ACCOUNT PAYABLE
    CASH INHAND,OR IN SHORT TERM LOAN
    BANK,FD,MF CASHCREDIT &OVERDRAFT
    ACCOUNT RECIEVABLES ADVANCE FROM CUSTOMER
    INVENTORY OUTSTANDING
    PRE PAID EXPENSES EXPENSES ,RENT
    SHORT TERM LOAN,ADVANCES TERM LOAN INSTALLMENTS

    WHAT IS CURRENT RATIO?

    CURRENT ASSETS/CURRENT LIABILITIES=CURRENT RATIO

    CURRENT RATIO SHOWS THE CAPACITY OF COMPANY TO PAY OUT ITS LIABILITIES

    IF CURRENT RATIO 2:1 MEANS CURRENT ASSETS ARE ALMOST DOUBLE TO CURRENT LIAB YOU CAN
    PAY DEBT EASILY

    IF CA IS 0.7:1 THEN LIABLITES IS MORE THEN COMPANY HAS TO TAKE LOANS SO FINANCIAL
    SITUATION OF COMPANY GETTING WORSE.

    CURENT A AND LIA IS ALSO USED IN WORKING CAPITAL

    WORKING CAPITAL=CURRENT ASSETS -CURRENT LIA

    WC IS THE AMOUNT OF MONEY REQUIRED FOR A OPERATING WORKING CYCLE

    AS RAW MATERIALS USED IN WORK IN PROGRESS,FINISHED GOODS HAD DEBATORS WHICH NOT
    GIVE MOEY INSTANTLY SO ZFTERB3 MONTHS GET MONEY AND CONVERTED TO RAW MATERIALS

    SO THE GAP OF THE 2 ND 3 MONTHS FOR FINANCE IS FROM WORKING CAPITAL

    WORKING CAPITAL;AMOUNT TO BE NEEDED TO DAY TO DAY OPERATION OFA BUISNESS

    =CA-CL

    CA= CONVERT IN CASH IN 1 YEAR

    LIA= ACCOUNTS PAYABLE= HAVE TO PAY IN 1 YEAR

    CA=CASH+ACCOUNTS RECIEVABLE+INVENTORY

    INVENTORY=RWA MATERIAL+WIP STOCKS+FINISHED GOODS


    SHOP ACADEMY

    FACTORY

    ACADEMY TELLS SHOP TO BUY 10 BALLS

    10 BALLS COST=1000 PRICE=1500 1 BALL -100RS

    SHOP BUY 10 BALLS 1000 RS AND SELL AT 1500 RS 1 BALL 15RS

    CASE-1

    CASH=5000 ORDER COMES IMME BUY ORDERS FROM FACTORY

    INVENTORY=0 NO EQUIP TIME TAKES AND ACADEMY GOES TO NEXT STORE SO

    ACCOUNTS REC=0

    ACCNTS PAY=0

    NET WORKNG CSP=50000 …PROFIT=0

    CASE-2

    ORDER=10 BALLS WITH INVENTORY

    CASH=50000

    INVENTORY=2 LAKHS INVESTED

    SO SELLS BALLS BY INVENTORY SO GET 1500 RS CASH SO

    CASH=50000=1500=51500

    INVENTORY=2 LAKHS-1000=199000

    ACNTS REC=0

    ACNTS PAY=0

    NET W CAP=51500+199000+0+0=250000
    CASE3

    ORDER=10 CRICKET KITS

    COST-100000

    PRICE -150000

    CASH=50000

    INVENOTRY=200000-1000000=1 LAKH

    NOW ACADEMY SAYS THEY WILL PAY AFTER 30 DAYS

    ACNT REC=150000

    ACNTS PAY=0

    NET=50000+100000+150000=3 LAKH

    PROFIT=50000

    CASE 4

    ORDER=10 CRICKET KITS

    COST-100000

    PRICE -150000

    CASH=50000

    INVENOTRY=200000-1000000=1 LAKH

    ACNT REC=150000

    NOW HE TAKES CREDIT FROM FACTORY FOR 30 D

    ACNTS PAY=200000

    NET=50000+100000+150000=300000-200000=100000

    PROFIT =50000

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