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Working Capital Management.

The document provides information about working capital requirements for three different companies. It includes production levels, inventory holding periods, credit terms, cost structures and other financial details. Using this information, statements of working capital needed are to be prepared.

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gtiwari7281
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190 views2 pages

Working Capital Management.

The document provides information about working capital requirements for three different companies. It includes production levels, inventory holding periods, credit terms, cost structures and other financial details. Using this information, statements of working capital needed are to be prepared.

Uploaded by

gtiwari7281
Copyright
© Attribution Non-Commercial (BY-NC)
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd
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Working Capital Management Problem: 1.

(a) (b) (c) (d) (e) (f) (g) From the following information you are required to prepare working capital

requirement statement of Swathi Company: Normal production 2,40,000 units per year Raw material in stock 2 months Processing period 1 months Finished goods 3 months Credit allowed to customer 3 months Selling price per unit Rs. 20 Expected ratio of cost to selling price: Raw material 60% Direct wages 10% Overheads 20% Profits on sales 10%

Problem: 2.

A proforma cost sheet of a company provides the followings particulars: Raw materials Direct labor Overheads Total cost Profit Selling price Amount per unit 80 30 60 _______________ 170 30 ________________ 200 _________________

The following further particulars are available: Raw material in stock, on an average one month; Material in process on an average one month; Finished goods in stock, on an average one month; Credit allowed by supplier is one month; Credit allowed to debtor is two months; Lag in payment of wages is one and half weeks, Lag in payment of overheads expenses is one month. One fourth of output is sold against cash. Cash in hand expected to be Rs. 25,000 You are required to prepare statement showing the working capital needed to finance a level of activity of 104000 units of production.

Problem: 3.

The Management of a Gemini Ltd. has called for a statement showing the working

capital needed to finance a level of activity of 300000 units of output for the year. The cost structure for the companys product for the above mentioned activity level, is detailed below: Cost per unit (Rs.) 20 5 15 ______________ 40 10 ______________ 50 ______________

Raw materials Direct labor Overheads Total cost Profit Selling price

Past trends indicate that the raw materials are held in stock on an average, for two months. Work in progress (50% complete) will approximately to half a months production. Finished goods remain in warehouse, on an average for a month. Suppliers of material extend a month credit. Two months credit is normally allowed to debtors. A minimum cash balance of Rs. 25,000 is to be maintained. The production pattern is assumed to be even during the year. Prepare statement of working capital determination.

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