2.  Capital expenditure involves the purchase of assets that are expected to last for more than one year, building and machinery.  Revenue expenditure is spending on all costs and assets other than fixed assets; wages, salaries and materials for stock.  These two types will be financed in different ways, explain why.

3.  The “life blood” of the business.  Finance needed for the everyday expenses; wages and stock.  Without sufficient working capital a business will be illiquid.  A business needs to ensure that it has enough finance to maintain its current assets and stock.

4.  Too high is a disadvantage; opportunity cost of having capital tied up in stock, debtors and idle cash.  Too little means bills cannot be paid and the company could be made insolvent.  The working capital requirement will depend upon the length of the working capital cycle

5. Cash Material stocks Production Sell/Debtors  The longer it takes to complete this cycle the more working capital is required. When credit is given to purchasers it will lengthen the cycle. Credit received will lengthen the time before stock bought has to be paid for.  To give more credit than is received increases the need for working capital.  To receive more credit than is given reduces the need for working capital

6.  There are dangers in having too much working capital and too little.  The 4 components of managing the cycle are; 1 Debtors 2 Creditors 3 Stock 4 Cash Explain how each of these can be managed to improve the management of working capital.