Case Study:

Jupiter trading head office building project working capital management practice
Jupiter Trading Head Office Building construction project is located at Casa Inchis area, Kirkos Sub
city, Woreda 08, Addis Ababa. The Works consist of Construction of 2B+G +10+ Roof Terrace Office
Building. The owner of the project is Jupiter trading PLC (ATO YARED BISRAT). The project is
executing by Eliana Construction and supervised by ATK Building Investment PLC.

The scope of works is provision of labor construction services for the construction of Sub
Structure and Super structures works i.e. Excavation and earth works, concrete works, form
works, reinforcement bars of 2B+G+10+Roof Terrace Office Building. The expected time and
cost of the project is 1year and 5,356,345.84 ETB.
ASSETS
Current assets Cash
Payment 1 865,360.60 ETB
Payment 2 840,386 .82 ETB
Payment 3 987,539.15 ETB
Account receivable (requested Payment 4) 1,119,111.3 ETB
Retention 114,.371.9 ETB
Total Current assets 3,926,768.771 ETB
LIABILITY
Current liability Account liability (Advance repayment) 571,859.53 ETB

Manpower and equipment cost 1,466,981.12 ETB

Site Overhead cost 762,479.373 ETB
VAT (15%) 168,817.314 ETB
Total Current liability 2,970,137.327 ETB

Working Capital (Net Working Capital) = Current Asset – Current Liability

Negative working capital depicts existence of working capital deficiencies. I.e. the firm is
unable to meet its day to day business operation.
Positive working capital indicates that the firm is able to continue its operation and has
sufficient fund to satisfy both maturing short-term debts and upcoming operational
expenses.
For the above sample project
The sum total current asset is 3,926,768.771 ETB
The sum total expense incurred with in the budget year 2,970,137.327 ETB
Therefore Net Working Capital = Current Asset – Current Liability
= (3,926,768.771-2,970,137.327) ETB
= 956,631.444ETB
The obtained result implies that there is an excess amount of 956,631.444ETB over
the expected expenses.