This is one of the series of articles on working capital computation for oil and gas companies. Here, I will analyze that of Japaul Gold and Venture Plc. This company WC is quite interesting. They pull off their bank overdraft in the 2020 financial year.
To calculate working capital, you subtract current liabilities from current assets. From the financial statement of Japaul Gold, the total current asset for the group was 4,930,335 and 10,926,357 Naira for 2020 and 2019 respectively. And the total current liabilities were 7,173,663 and 12,641,742 Naira. When subtracted, that (A) – (B), you get -2,243,328 and -1,715,385 Naira. In both years, Japaul Gold’s working capital was negative.
For the company, the total current assets were 10,503,041 and 18,192,507 Naira, respectively. Also, the total current liabilities were 4,337,582 and 11,604,736 Naira for both financial years under consideration. Japaul Gold holds a positive working capital of 6,165,459 and 6,587,771 Naira for the 2020 and 2019 financial years.
A reason why the working capital for the group is negative is the account payables. Japaul Gold as a group holds a huge amount of working capital compared to the company. Group’s A/C Payables was higher by 38 percent compared with the company in 2020. More so, the Group A/C Payables for 2019 was higher by 4.3 percent. Another reason is the bank overdraft. The value of the Group’s bank overdraft was 381,118 for the group in 2019. Bit no value for the company.
Why Understand Japaul Working Capital?
An understanding of Japaul Gold working capital is vital. The value tells you more about the company’s management of its limited resources daily. A positive WC means that the company can meet its daily obligations. Like, energy expenses (that is, fuel and electricity expenses). Having adequate working capital explains that every effort is made to get back money owed by debtors on one hand and optimize the amount owed to creditors.
Japaul Gold’s working capital was positive for the company and negative for the group. The value of WC for the company under review tells us more about WC finance. Which is in the short term. What’s important here is whether the company can meet its obligation as they fall due.