January 26, 2022

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Flour Mill Working Capital Calculation for March 2020 Accounting Year

Flour Mill Working Capital Calculation for March 2020 Accounting Year
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For Flour Mill, working capital is something else. The group fought for better of it in Mar-2019 but was not successful. It however pulls strong in March 2020. For the company, there isn’t any current issue with its WC. In this article, I will examine this with you!

First of all, working capital tells us if the company has enough cash to meet daily operational expenses. If a company cannot do so, it will need to borrow a working capital loan to fill the gap. If it can meet these day-to-day needs then the business is assumed to be healthy. However, WC does not tell us everything about a firm’s ability to meet daily obligations. You will need to observe other factors as well.

How to calculate Working Capital for Flour Mill

This is simple! The first step is to know the formula. Which is WC = CA – CL. Where WC is working capital, CA is current assets and CL is current liabilities. Next is to assess the statement of the financial position of the company you want to examine. I have downloaded Flour Mill’s annual report for the year ending March 2020.

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Now add up all the current assets and current liabilities from the statement. If you do so you should get total current assets of 180,269,383 and 189,731,687 for March 2019 and 2020 for the group and 142,576,777 and 125,183,222 for the company in the same comparing periods. The total current liabilities are 184,628,802 and 148,758,254 for 2019 and 2020 for the group. Then, 138,329,706 and 112,861,566 for the company.

From the screenshot below, you will see my calculated working capital for Flour Mill. In 2020 for example, the group’s current asset is 180,269,383 minus the current liabilities of 184,628,802 gives 40,973,433 as working capital. You can check the others as well.

Flour Mill Working Capital Calculation for March 2020 Accounting YearFlour Mill Working Capital Calculation for March 2020 Accounting Year

How you should understand Flour Mill Working Capital

For March 2020 and 2019, the comparable figure for WC shows that Flour Mill fights back. It has a negative working capital in 2019 of -4,359,419 but boasted it to 40,973,433 in 2020. The company did not experience any negative working capital for the two periods under review.

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From the above, we can say Flour Mill can meet its daily operating expenses. The company does not need to borrow either in the short or long term to finance daily operations. What is more, can we conclude that the firm is liquid? A liquid firm does not have cash issues.

Conclusion

Working capital calculation of Flour Mill reveals both positive and negative working capital as already explained. The company bounces back after experiencing a negative WC in 2019. Therefore, I concluded that the company is liquid.

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