Explanation

a(i). Danchukwu's working capital based on available information = Current Asset - Current liabilities
Current Assets:
Cash in hand   18,000
Stock                24,000  
                         42,000
Current Liabilities:
Creditors          22,000
Working Capital = 42,000 - 22,000 = N20,000.

(b) Uses of Working Capital include:

(i) It serves as a check against tying down of too much money for current assets.

(ii) It helps to determine availability of funds for the day-to-day running of the business.

(iii) It helps to determine the solvency of the business.

(iv) It indicates that the business is not financed by suppliers.

(v) Since the working capital is used to buy stock from where profit is derived, the higher the working capital the higher the profit expected.

(c) Current Capital is also known as floating capital. It is capital that is regularly required for business operation, e.g, stock and cash. However Fixed Capital are the durable items or investments a business uses to further produce goods.
Fixed assets of a business include the business buildings, machines, fixtures and fittings. Current Capital is the total current assets which include stock, cash and debtors, while fixed capital is the total fixed assets including machinery, etc.
 

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