Working capital, working capital requirement and cash
The functional balance sheet and its three quantities: net working capital, working capital requirement and net cash, and the effect of customer, supplier and stock lead times.
- 26 cards
- 6 topics
- Free
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Each topic is weighted the way the exam weighs it.
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A few cards from the deck
Functional balance sheet: what is it?
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A balance sheet regrouped by function rather than by due date: investment, operations, financing and cash, with fixed assets at gross value.
Accumulated depreciation moves to the resources side: it has already been recovered through sales prices.
A customer pays at 60 days, the company pays its supplier at 30 days, with no stock. For how many days does the company fund this sale on its own?
- 30 days
- 60 days
- 90 days
- 0 days, the supplier funds everything
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30 days
The supplier funds the first 30 days; from day 30 to day 60 the company has paid without collecting. Adding the lead times (90) or ignoring supplier credit (60) are the usual mistakes.
Net working capital = stable resources − ….
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Net working capital = stable resources − stable uses.
Stable uses are fixed assets at gross value; whatever exceeds them finances operations.
Net working capital (long-term basis): what is it?
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The part of stable resources left once stable uses are financed: stable resources less stable uses.
When positive, it finances the operating cycle. When negative, part of the investments is financed by short-term debt.