Indicative content
Responses may include:
AO1 Knowledge and understanding
- Finance used in day-to-day / trading operations / to enable the business to produce its goods or services / to operate
- Current assets - current liabilities
AO2 Application
Explanation of working capital
- APP can be awarded for a second AO1 point
- To pay for the running costs - bills/expenses such as staff wages
- Finance trade credit periods offered to customers
- Reference to short-term (less than 12 months)
- Sufficient working capital is needed to ensure that the business has enough liquid assets/avoid liquidity problems
Application to a context applied to SW to explain the term working capital
- Examples of current assets, e.g. stock, inventory, debtors;
or examples of current liabilities, e.g. bank overdraft, short- term loans, creditors
- Examples of expenses/costs, e.g. staff wages
Application can be made to SW or any other scenario/context/business/person.
Allow application to working capital.
Accept all valid responses.
Guidance in awarding marks