Use the following information to answer the following questions: Items Le Debtor 30,000 Cash in hand 6,750 Plant and machinery 72,000 Motor van 31,000 Stock...

Answer Details

Teesan Enterprises as at 31/10/2010

Current assets = Debtor + Cash + Stock = 30,000 + 6,750 + 12,000 = Le48,750

Liquid (quick) assets = Current assets - Stock = 48,750 - 12,000 = Le36,750

Current liabilities = Trade creditors = Le43,000 (the loan is long-term)

(a) Liquid capital = Liquid assets - Current liabilities

= 36,750 - 43,000 = (Le6,250), a liquid-capital deficit. The quick assets (Le36,750) fall short of the current liabilities, so the firm cannot meet its short-term debts from its most liquid resources.

(b) Fixed assets = Plant and machinery + Motor van = 72,000 + 31,000 = Le103,000

(c) Capital (statement of affairs) as at 31/10/2010

Capital = Total assets - Total liabilities

Total assets = Fixed assets + Current assets = 103,000 + 48,750 = Le151,750

Total liabilities = Loan + Trade creditors = 50,000 + 43,000 = Le93,000

Capital = 151,750 - 93,000 = Le58,750

(d) Working capital = Current assets - Current liabilities

= 48,750 - 43,000 = Le5,750