Chicken Hub is a food outlet which is situated in the heart of the city of Durban. Its success depends on its ability to raise money at short notice. A cash reserve or quick access to funds can lead to new opportunities and accelerate Chicken Hub's growth. As the financial manager of Chicken Hub, how can you ensure that this food outlet always has the liquidity that it needs?

XYZ Ltd has the following current assets and current liabilities. 

 

Required:

1. Calculate the gross working capital.

2. Calculate the net working capital 

3. Comment on the ability of XYZ Ltd to pay off current liabilities (short-term debts) 

4. By referring to the current assets and current liabilities of XYZ Ltd, does a positive net working capital guarantee that XYZ Ltd will have enough cash to pay off all short-term debts when they fall due?

Transcribed Image Text:

Cash at Bank Inventory Accounts receivable (payment to he received after 2 weeks) Accounts payable (due today) R15 000 R40 000 R30 000 R45 000 Cash at Bank Inventory Accounts receivable (payment to he received after 2 weeks) Accounts payable (due today) R15 000 R40 000 R30 000 R45 000

Answer rating: 100% (QA)

1 To calculate the gross working capital we need to add up all of the current assets of XYZ Ltd From the information provided we know that Cash at Bank R15000 InventoryR40000 Accounts receivable payme... View the full answer