Analysing changes in working capital, Cost Accounting

By understanding the financial statements of a company, one of the first steps considered is the study of the changes in current financial position of the company and the purpose for the changes. We make a try studying these changes and their causes through using the data contained in the summarized comparative balance sheet.

Illustration

Tools India Limited

Balance Sheet as on December 31, 2003

(Rs. in Millions)

 

1703_ANALYSING CHANGES IN WORKING CAPITAL.png

 

As we have study previously that at the beginning of this section, the net change in working capital can be calculated easily by subtracting the net working capital at the ending of the year by the net working capital at the start of the year.

TOOLS INDIA LTD

Change in Working Capital

(Rs. in Millions)

December 31, 2002           December 31, 2003

Current assets

180.00

 

232.00

Less: Current Liabilities

80.00

 

105.00

Working Capital

100.00

 

127.00

Working capital on December 31, 2003

 

127.00

 

Working Capital on December 31, 2002

 

100.00

 

Increase in Working Capital

 

27.00

 

The Rs. 27 million rises in working capital of TIL demonstrating the composite changes in the operating assets. It does not tell us much in terms of the business' operations. Such change could be the net result of changes in all the accounts covered through current items. May be there has been qualitative changes resulting by the depletion of liquid items of current assets and raise in non-liquid items as inventory. So as to answer these questions we try to analyze the changes in all of the working capital accounts.

Posted Date: 4/9/2013 1:47:35 AM | Location : United States







Related Discussions:- Analysing changes in working capital, Assignment Help, Ask Question on Analysing changes in working capital, Get Answer, Expert's Help, Analysing changes in working capital Discussions

Write discussion on Analysing changes in working capital
Your posts are moderated
Related Questions
If question (CA IPCC) is silent which method to follow: avg cost or fifo or lifo?

10) Mike Taylor, the owner of Tennessee River Boat Rentals, is estimating the cost of operating his boat rental company next year. He expects to have 450 rentals during 200Z. The f

Weighted Average Method - Work in Progress While this method is employed, all costs of production are considered in assigning costs to inventory. The method puts together open

Prepare Cash Budget of a Company The given information concerned to the proposed budget for a company for the months ending on 31 December 1996. Additional Information

What do you mean by differential costing ? How it differ from marginal costing ? explain its practical application with examples?

specimen of cost sheet

What is a standard and acceptable variance

The vice president of operations of six layer computer Inc. is evaluating the performance of two divisions organized as investments centers. Invested assets and condensed income st

Capital We have seen previous in this section that the fundamental accounting equality states as: Assets = liabilities + owners equity. From the illustration of balanc