Description
The doc describes about how to calculate the working capital requirement along with examples
How to Calculate the Working Capital Requirement (WCR) ?
WCR = [Accounts Receivable + Inventory + Prepaid Expenses] minus [Accounts Payable + Accruals]
Example : Click here to see the source of data Starworld Group End of Year Year Year 1 Year 3 2 232 97 35 364 116 36 152 + 212 278 362
Accounts Receivable Inventory Prepaid expenses Total Accounts Payable Accruals Total WCR (*) +
116 151 20 55 414 568 139 181 45 55 184 236 + 230 + 332
(*) As the WCR is positive, that means a Net Requirement of funds. Variation of WCR : Starworld Group Accounts Receivable Inventory Prepaid expenses Total Accounts Payable Accruals Total Variation of WCR (*) Year 2 46 19 -15 50 23 9 32 + 18 Year 3 84 35 35 154 42 10 52 + 102
(*) As the variation of WCR is positive, that means a Net Requirement of funds : 18 in 2000 and 102 in 2001.
Sources : Understanding Financial Statements, 1999, Marc Bertonèche, Ph. D. in Finance from the Northwestern University, Professor at the Bordeaux University and at Sciences-PO Paris, Visiting Professor at Harvard Business School and Oxford University. Corporate Finance Course, Bernard Jaquier, Professor in Economics & Finance, Ecole Hôtelière de Lausanne, 2007
doc_949412751.doc
The doc describes about how to calculate the working capital requirement along with examples
How to Calculate the Working Capital Requirement (WCR) ?
WCR = [Accounts Receivable + Inventory + Prepaid Expenses] minus [Accounts Payable + Accruals]
Example : Click here to see the source of data Starworld Group End of Year Year Year 1 Year 3 2 232 97 35 364 116 36 152 + 212 278 362
Accounts Receivable Inventory Prepaid expenses Total Accounts Payable Accruals Total WCR (*) +
116 151 20 55 414 568 139 181 45 55 184 236 + 230 + 332
(*) As the WCR is positive, that means a Net Requirement of funds. Variation of WCR : Starworld Group Accounts Receivable Inventory Prepaid expenses Total Accounts Payable Accruals Total Variation of WCR (*) Year 2 46 19 -15 50 23 9 32 + 18 Year 3 84 35 35 154 42 10 52 + 102
(*) As the variation of WCR is positive, that means a Net Requirement of funds : 18 in 2000 and 102 in 2001.
Sources : Understanding Financial Statements, 1999, Marc Bertonèche, Ph. D. in Finance from the Northwestern University, Professor at the Bordeaux University and at Sciences-PO Paris, Visiting Professor at Harvard Business School and Oxford University. Corporate Finance Course, Bernard Jaquier, Professor in Economics & Finance, Ecole Hôtelière de Lausanne, 2007
doc_949412751.doc