(a) State five factors that can affect the rate of turnover of a company.
(b) What is working capital?
(c) Explain four importance of working capital.
Explanation
a. Factors affecting turnover:
(i) Reputation of the company (goodwill).
(ii) The type/nature/varieties of goods being sold.
(iii) Availability of credit facilities.
(iv) The level of advertisement and publicity put in place by the company.
(v) The pricing policy adopted by the company (Reduction in price).
(vi) Level of competition.
(vii) Availability of stocks for sale.
(viii) Nearness to consumers.
(ix) Good packaging and branding.
(b) Working capital is the amount of money available for the day-to-day running of a business. It is calculated as current assets less current liabilities.
(c) The importance of working capital:
(i) Adequate working capital ensures that a company can meet its day-to-day activities.
(ii) It shows whether a company is solvent or not.
(iii) It determines the size of the business and the volume of trading.
(iv) It is used to manage resources efficiently for higher profits.
(v) It shows whether a company is overtrading or not.
(vi) It can be used by a business for planning against loss.