Answer:

Working Capital = Total Assets - Total Liabilities

Working Capital = £320,000 - £120,000

Working Capital = £200,000

Therefore, PQR plc's working capital is £200,000.

Fixed Assets are long-term assets that a business owns and uses in its operations. They are not typically converted into cash within one accounting period. Current Assets are assets that a business expects to convert into cash within one year.

Examples:

• Fixed Assets: Property (land and buildings), Machinery, Vehicles, Furniture. These assets are used to generate revenue over multiple accounting periods.
• Current Assets: Cash, Stock (inventory), Accounts Receivable (money owed to the business by customers). These assets are expected to be converted into cash relatively quickly.

Importance of Accurate Classification:

• Financial Statement Accuracy: Correct classification ensures that financial statements (e.g., balance sheet, profit and loss account) accurately reflect the financial position and performance of the business.
• Profitability Assessment: The classification of assets impacts profitability calculations. For example, depreciation is only applied to fixed assets.
• Loan & Investment Decisions: Lenders and investors rely on accurate asset classifications to assess a business's solvency and creditworthiness. Incorrect classification can lead to poor decisions.
• Taxation: Tax regulations often differ based on asset classification.

(a) The statement of financial position does not explicitly state the value of fixed assets. However, fixed assets are assets that are used in the business for more than one year. In this case, the only asset that could reasonably be considered a fixed asset is the 'Fixtures & Fittings' which is not listed. Therefore, we cannot calculate the value of fixed assets from the given information. Answer: Cannot be determined from the information provided.

(b) Capital Employed is the amount of money used to finance the business. It is calculated as: Capital Employed = Total Assets - Total Current Liabilities

Total Assets: £5,000 + £18,000 + £10,000 = £33,000

Total Current Liabilities: £7,000 + £20,000 = £27,000

Capital Employed: £33,000 - £27,000 = £6,000

Therefore, the capital employed by Green Grocers is £6,000.