The requirement here was to analyse and compare the current asset and current liability positions of March 2014 and March 2015, and discuss how the working capital financing policy of the company would have changed.

Adding figures for trade payables and the overdraft to the figures already calculated in part (b) gave the current asset and current liability position for March 2015. Comparing the two positions showed an increased reliance on short-term finance and hence a more aggressive approach to working capital financing.

A number of candidates discussed at length possible reasons for the changes in inventory, trade payables, trade receivables and so on, often writing as though the changes had occurred rather being forecast. Many remedies were also proposed for the company’s problems. However, the question had asked for neither reasons nor remedies, only that the two working capital positions be analysed and compared.

The only discussion that was specifically required was in the area of working capital financing. This emphasises the need to read the question requirement carefully and to respond directly to what is required, and to check regularly as an answer is written that what is being written is relevant to what is required.

Clearly, detailed discussions of working capital financing policies, looking at fluctuating current assets, permanent current assets, and conservative and moderate financing policies were not required.