Calculate working capital and statement totals
Use simple statement figures to calculate total assets, total liabilities and working capital, then interpret the result.
Section 5 · Financial information and decisions
Exam scope and assessment notes
Cambridge IGCSE Business Studies 0450, 2026 syllabus, Version 2. Use the 2026 A*–G route; this qualification changes to 0264 for first assessment in 2027. Candidates are not assessed on constructing income statements or statements of financial position, nor on price-elasticity or exchange-rate calculations. Simple cash-flow forecast construction is assessed. Written practice is self-checked, not an official Cambridge grade; timed-paper evidence and human subject-teacher review remain outstanding.
Before you begin
- No previous finance study is assumed. Identify the time period, whether a figure is a stock or a flow, and the units before calculating or recommending.
Work on paper. Try each question before revealing help, and explain why your method works.
Quick readiness check
Which figures are used to calculate working capital?
What you will learn
- Total statement categories
- Calculate working capital
- Use totals to support a cautious decision
Calculate from the given statement
Total assets combine the asset amounts listed. Total liabilities combine amounts owed. Working capital = current assets − current liabilities; the syllabus includes this calculation based on a statement of financial position.
Keep current and non-current categories clear. A bank overdraft or trade payable is a current liability in the examples; inventory, trade receivables and cash are current assets.
Interpret a simple balance
Working capital shows the net difference between current assets and current liabilities at a point in time. It may support a liquidity discussion, but asset quality and due dates affect whether obligations can be met.
A decision based on a statement should consider trends or other evidence. One balance-sheet date does not show every cash receipt, payment or future trading result.
Pause and explain
What should a manager check alongside working capital?
Worked example
A statement lists cash $8,000, inventory $13,000, receivables $9,000, machinery $45,000, payables $11,000 and a long-term loan $20,000. Calculate total assets, total liabilities and working capital.
Show the worked solution
- Total assets = 8,000 + 13,000 + 9,000 + 45,000 = 75,000.
- Total liabilities = 11,000 + 20,000 = 31,000.
- Current assets = 30,000; working capital = 30,000 − 11,000 = 19,000.
Answer Total assets are $75,000, total liabilities are $31,000 and working capital is $19,000. Working capital uses current assets only and subtracts current liabilities only.
Try a topic test
Choose Easy, Normal or Difficult. Save your answers and open worked review after finishing.
Test this topic →From guided practice to a new situation
Write your answer and reasoning first. Use a hint only if you are stuck. The model solution is for self-checking; your written work is not automatically marked.
Current assets are cash $4,500, inventory $7,500 and receivables $6,000. Current liabilities are payables $9,000 and overdraft $2,000. Calculate working capital.
Give me a hint
Add current assets, add current liabilities and subtract the latter from the former.
Compare my reasoning
- Current assets = 4,500 + 7,500 + 6,000 = 18,000.
- Current liabilities = 9,000 + 2,000 = 11,000.
- Working capital = 18,000 − 11,000.
Working capital is $7,000. Both the trade payable and overdraft are current liabilities in this example.
Look for these in your work
- Asset total correct
- Liability total correct
- Working capital correct
A statement has current assets $36,000, non-current assets $64,000, current liabilities $28,000 and non-current liabilities $25,000. Calculate total assets, total liabilities and working capital.
Give me a hint
Add each category separately; working capital uses only current figures.
Compare my reasoning
- Total assets = 36,000 + 64,000 = 100,000.
- Total liabilities = 28,000 + 25,000 = 53,000.
- Working capital = 36,000 − 28,000 = 8,000.
Total assets are $100,000, total liabilities are $53,000 and working capital is $8,000. Do not include non-current items in working capital.
Look for these in your work
- Asset total correct
- Liability total correct
- Current-only working capital
A retailer has positive working capital, but most current assets are slow-moving stock and an overdraft is due soon. Explain why the owner should review the situation.
Give me a hint
Consider whether assets can become cash in time for the liability.
Compare my reasoning
- The positive net figure combines assets with different liquidity.
- Slow-moving stock may not sell before the overdraft is due.
- Review cash, stock turnover, receipts and the overdraft terms.
Positive working capital does not guarantee timely payment. Slow-moving inventory may not convert to cash before the overdraft is due, so the owner should review cash, stock turnover, expected customer receipts and the bank's repayment terms.
Look for these in your work
- Working-capital limit identified
- Timing risk explained
- Useful checks listed
Common mistakes
- Including a non-current asset in working capital
- Omitting a liability from the total
- Treating a positive working-capital number as proof all bills can be paid
What can you explain now?
Which figures are used to calculate working capital?
Compare with the explanation
Current assets and current liabilities
Working capital = current assets − current liabilities.
After trying it yourself, choose your next review. This is your self-assessment.
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Make it stick
Which categories are included in total liabilities, and which figures determine working capital?
If you needed the solution, close it and solve the problem again from a blank page. A correct answer is stronger when you can explain the reason for each step.