A company has the following assets and liabilities at 31 December: premises £30,000; trade creditors £4,000; stock £9,000; amounts owed for rent at 31 December £900; cash in hand £2,500; balance at bank overdrawn £3,400; trade debtors £3,600; equipment £5,000.

a) How much is the company worth — i.e. what is its capital (equity) on 31 December?

b) If, six months later, the capital has increased by £4,000, what reasons could account for this?

c) If, six months later, the capital has decreased by £2,000 what could be the reasons for this decrease?