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CMA Intermediate · Financial Management and Business Data Analytics · Fund Flow Statement - Preparation and Analysis

Under the working capital concept of funds, a fund flow statement shows opening and closing balances of current items. Opening current assets of Mehta Industries were Rs 5,40,000 and current liabilities Rs 2,40,000. Closing current assets were Rs 6,10,000 and current liabilities Rs 2,50,000. What is the change in working capital?

Working capital rose by Rs 60,000. Opening working capital was Rs 3,00,000 (5,40,000 minus 2,40,000) and closing working capital was Rs 3,60,000 (6,10,000 minus 2,50,000), so the increase is Rs 60,000, which appears in the schedule of changes in working capital.

  1. AIncrease of Rs 60,000Correct
  2. BIncrease of Rs 80,000
  3. CDecrease of Rs 60,000
  4. DIncrease of Rs 70,000

Explanation

Opening WC = 5,40,000 - 2,40,000 = 3,00,000. Closing WC = 6,10,000 - 2,50,000 = 3,60,000. Change = 60,000 increase. Rs 70,000 ignores the rise in current liabilities; Rs 80,000 is a wrong-base error.

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