Management report regarding the financial performance of the National Essay

Management report regarding the financial performance of the National Folk Festival Ltd for year ended 30 June 2007 - Essay Example Net Working Capital is therefore the difference between current assets and current liabilities. (Carey and Towers-Clark 2011) Working capital is relevant since it is a measure of the firm’s liquidity and efficiency because it involves all current assets and current liabilities. (Adams 2006) It is a reflection of the results of a number of other company activities like revenue collection, inventory management, payment to suppliers and debt management. A positive working capital in a firm would be an indicator of its ability to pay off its short-term obligations quickly. On the other hand, a negative working capital indicates that the business is struggling to pay off these short-term liabilities fast enough. (Atrill and McLaney 2011) In the case study of National Folk Festival Ltd, its working capital position for both 2007 and 2006 can be evaluated and compared. The comparison is to ascertain how liquid the firm was in these two years. The working capital of the company can be calculated as shown below: The year 2007 had a higher working capital than 2006. This means that in the year 2007, National Folk Festival Ltd was more liquid than in 2006 since it had more money to pay off its short-term liabilities as and when they fell due. A closer look at the current assets and liabilities for both years reveals that in 2007, the company had more current assets and fewer current liabilities compared to 2006. This was what attributed to the higher working capital in 2007 than in 2006. A comparison of the income statement items for the years 2007 and 2006 shows that the company made significant improvements in 2007. In Appendix 1, a variance analysis shows the increase or decrease of incomes and expenses from 2006 to 2007. An increase in income or decrease in expense is a favourable variance while a decrease in income or an increase in expense is an adverse variance. The tickets sales in the year 2007 were higher than