PART 2

The following are extracted from Charles Corporations Statement of Financial Position as at 30 September 2020:-

Current Assets	$
Cash	4,000
Marketable Securities	8,000
Accounts Receivable	100,000
Inventories	120,000
Prepaid Expenses	1,000
Total Current Assets	233,000
Current Liabilities Notes Payable	5,000
Accounts Payable	150,000
Accrued Expenses	20,000
Income Tax Payable	1,000
Total Current Liabilities	176,000

REQUIRED:

1. Perform calculation of the following:-

1. Working capital, (2 marks)
2. Current ratio, and (2 marks)
3. Quick ratio (2 marks)

2. Based on the answers to part (a), explain with reason whether Charles Corporation has good or poor liquidity if the industry averages are at a current ratio of 1.30 and a quick ratio of 1.02.

(8 marks)

3. Discuss THREE disadvantages of having inadequate or shortage of working capital.

(12 marks)

4. Discuss THREE ways a business could improve the working capital.

(12 marks)

5. Explain on a situation of Overtrading.

(12 marks)

(Total: 50 marks)