Dear Sir, I just started a Construction Financial Management course at Heriot-Watt, without having any previous accounting or financing experience/knowledge. What would be the best material to start learning and practice on, here on Open Tuition? Where should I start? There will be a two hours sitting exam for this course and I very much doubt that I would be able to pass only with the tutorials from the Uni. I am an Independent Distance Learning student studying for a postgraduate degree in Construction Project Management. Many thanks. Florin
Sir, Do banks have working capital? Is the Liquidity Coverage Ratio (LCR) the same as Current Ratio/Working Capital Ratio? It is difficult to calculate the working capital of a bank because a bank's balance sheet does not include typical current assets and liabilities.
So liquidity coverage ratio is liquid(quick)assets/liquid(quick)liabilities while current ratio or working capital ratio is current assets/current liabilities. The only coverage ratios which exist are debt coverage ratios and interest coverage ratio. Interest coverage ratio = Earnings before interest and tax/Interest. Debt coverage ratio = Earnings before Tax + Interest/Interest + Debt Principal Amount. Preference Dividend Coverage Ratio = Earnings after tax/Preference Dividend. Equity Dividend Coverage Ratio = Earnings available for equity shareholders/Equity Dividend. As for calculating the working capital of a bank from a bank's balance sheet the current liabilities of a normal non banking business are current assets of a bank like overdraft or short term loans and advances whereas the current liabilities of a bank would be the short term loans and overdraft it has taken from other banks or financial institutions. The net difference between the two is net working capital of bank.
In this example is it assumed especially in the payable days that credit purchases and the raw material purchases is the same ? Corresponding to 28:40.
Wonderful tutorial. One error though, at calculating raw materials inventory days, you stated that raw materials days were 76. As the product of (108000/518400)*365 is 76.042, then it means that it should be rounded to the next day, which is 77, because days are whole numbers, any decimal spaces afterwards would fall on the next day. To be precise, the inventory days would fall at about 1 AM of the 77th day.
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Very good example to understand working capital and cash cycle. Thank you
God bless you sir Great explanation Thanks
Thank you Opentuition
Dear Sir,
I just started a Construction Financial Management course at Heriot-Watt, without having any previous accounting or financing experience/knowledge. What would be the best material to start learning and practice on, here on Open Tuition? Where should I start? There will be a two hours sitting exam for this course and I very much doubt that I would be able to pass only with the tutorials from the Uni. I am an Independent Distance Learning student studying for a postgraduate degree in Construction Project Management. Many thanks.
Florin
Hi Florin, I guess it would be better if you ask this on opentuition forum... they are quick on reply...
Thanks 🙂
Brilliant teacher 💛
Thank you 🙂
Do u have lectures on debtor management in FM ? I really am in need of that
Yes, of course. You can find an index linking to all of our lectures on our free website.
Sir,
Do banks have working capital?
Is the Liquidity Coverage Ratio (LCR) the same as Current Ratio/Working Capital Ratio?
It is difficult to calculate the working capital of a bank because a bank's balance sheet does not include typical current assets and liabilities.
So liquidity coverage ratio is liquid(quick)assets/liquid(quick)liabilities while current ratio or working capital ratio is current assets/current liabilities. The only coverage ratios which exist are debt coverage ratios and interest coverage ratio. Interest coverage ratio = Earnings before interest and tax/Interest. Debt coverage ratio = Earnings before Tax + Interest/Interest + Debt Principal Amount. Preference Dividend Coverage Ratio = Earnings after tax/Preference Dividend. Equity Dividend Coverage Ratio = Earnings available for equity shareholders/Equity Dividend. As for calculating the working capital of a bank from a bank's balance sheet the current liabilities of a normal non banking business are current assets of a bank like overdraft or short term loans and advances whereas the current liabilities of a bank would be the short term loans and overdraft it has taken from other banks or financial institutions. The net difference between the two is net working capital of bank.
In this example is it assumed especially in the payable days that credit purchases and the raw material purchases is the same ? Corresponding to 28:40.
Yes. In the exam you have to make the best use of the information available, as is the case here.
Wonderful tutorial. One error though, at calculating raw materials inventory days, you stated that raw materials days were 76. As the product of (108000/518400)*365 is 76.042, then it means that it should be rounded to the next day, which is 77, because days are whole numbers, any decimal spaces afterwards would fall on the next day. To be precise, the inventory days would fall at about 1 AM of the 77th day.