FINANCIAL MANAGEMENT - CPC5A
PROBLEMS FROM UNIT – 5 – WORKING CAPITAL & OPERATING CYCLE –
5 MARKS QUESTIONS
1. Q.18.B November 2018 – Working Capital
Calculate the debtor’s turnover ratio and averages age of debtors from
the following data.
Rs.
Cash Sales 6,00,000
Total Sales 12,00,000
Bills receivables (1.1.17) 45,000
Bills receivables (31.12.17) 55,000
Debtors (1.1.17) 80,000
Debtors (31.12.17) 1,20,000
2. Q.17.B November 2016 –Working Capital
From the following estimates, calculate the average amount of working
capital required:
Per Annum
Rs.
(a) Average amount locked up in stock:
10,000
(stock of finished goods and work-in-progress)
Stock of stores, material etc 8,000
(b) Average Credit Given:
Local sales 2 week’s credit 1,04,000
Outside the state 6 week’s credit 3,12,000
(c) Time available for Payments:
For purchases 4 weeks 78,000
For wages 2 weeks 2,60,000
Add 10% to allow for contingencies
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3. Q.19.B November 2015 – Working Capital
A and B who want to buy a business seek your advice about the average
working capital requirements in the first year’s trading. The following
estimates are available and you are asked to add 10% to allow for
contingencies
Per Annum
Rs.
(a) Average amount locked up in stock:
5,000
(stock of finished goods and work-in-progress)
Stock of stores, material etc 8,000
(b) Average Credit Given:
Local sales - 2 week’s credit 78,000
Outside the state 6 week’s credit 3,12,000
(c) Time available for Payments:
For purchases 4 weeks 96,000
For wages 2 weeks 2,60,000
Calculate average amount of working capital requirement
4. Q.18.B November 2014 – Working Capital
Rose Ltd is engaged in customer retailing. You are required to estimate
its working capital requirements from the following data
Projected Annual sales Rs. 9,00,000
Percentage of net profit to cost of sales 20%
Average credit allowed by debtors 1 month
Average credit allowed by creditors 2 months
Average stock carrying (in terms of sales 2 ½ months
requirements)
Add 10% to allow for contingencies
5. Q.17.B April 2016 – Working Capital
M Ltd. approaches you to calculate the working capital requirements,
so as to acquire a business from the following information, prepare it.
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Rs.
(a) Amount locked up in inventories
Raw materials 2,500
Finished goods 5,000
(b) Credit sales per annum (Credit allowed 2 months) 60,000
(c) Manufacturing expenses per annum 24,000
Wages per annum (delay in payment 1 month) 36,000
(d) Consumption of raw material per annum
12,000
(Credit allowing 3 months time)
You add 10% for contingencies
6. Q.18.B April 2015 – Working Capital
Prepare an estimate of working capital requirement from the following
information of a trading concern.
a) Projected annual sales 1, 00,000 units.
b) Selling price per unit Rs. 8.
c) Percentage of net profit on sales 25%.
d) Average period of credit allowed to customers 8 weeks.
e) Average credit period allowed by supplier 4 weeks.
f) Average stock holdings in terms of sales requirements 12 weeks.
g) Allow 10% for contingencies.
7. Q.15.B April 2014 – Working Capital
A company has the following selected assets and liabilities. You are
required to calculate working capital.
Cash Rs. 45,000; Retained earnings Rs. 1,60,000; Equity share capital Rs.
1,50,000; Debtors 60,000; Inventory Rs. 1,11,000; Debentures Rs.
1,00,000; Provision for taxation Rs. 57,000; Expenses outstanding Rs.
21,000; Land and building Rs. 3,00,000; Goodwill Rs. 30,000; Furniture
Rs. 25,000; Creditors Rs. 39,000.
8. Q.19.B April 2013 – Working Capital
Prepare an estimate of working capital requirement from the following
information of a trading concern.
a. Projected annual sales 1, 00,000 units.
b. Selling price per unit Rs. 8.
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c. Percentage of net profit on sales 25%.
d. Average credit period allowed to customers 8 weeks.
e. Average credit period allowed by suppliers 4 weeks.
f. Average stock holdings in terms of sales requirements –
12 weeks.
g. Allow 10% for contingencies.
FINANCIAL MANAGEMENT - CPC5A
4
PROBLEMS FROM UNIT – 5 – WORKING CAPITAL & OPERATING CYCLE –
10 MARKS QUESTIONS
1. Q.24.C November 2019 - Working Capital Operating Cycle
Calculate the operating cycle of a company which gives the following
details relating to its operations:
Rs.
Raw material consumptions per annum 8,42,000
Annual cost of production 14,25,000
Annual cost of sales 15,30,000
Annual sales 19,50,000
Average value of current assets held
Raw materials 1,24,000
Work-in-progress 72,000
Finished goods 1,22,000
Debtors 2,60,000
The company gets 30 days credit from its suppliers. All sales made by
the firm are on credit only. You may take one year as equal to 365 days.
2. Q.24.C November 2018 – Working Capital
From the following information, prepare a statement showing working
capital by the company.
Level of production per month: 20,000 units
Selling price per unit: Rs. 20
Margin on sales: 10%
Expected ratios of cost to selling price:
Raw materials – 55%
Direct labour – 20%
Overheads – 15%
Other Information
Raw materials required in stock – 2 months
Processing period – 1 month
Finished goods in stock on an average – 2 months
Recovery from customers after one month
3. Q.21.C November 2017 – Working Capital
Mr. Krishnan wishes to commence a new trading business and gives the
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following information
The total estimated sales in a year will be Rs. 12,00,000
a) His expenses are estimated as fixed expenses Rs. 2,000 p.m. plus
variable expenses equal to 5% of the turnover
b) He expects to fix a sales price for each product which will be
25% in excess to his cost of purchase
c) He expects to turnover his stock four times in a year
d) The sales and purchases will be evenly spread throughout the
year. All sales will be evenly spread throughout the year. All
sales will be for cash but he expects one month’s credit for
purchases
Calculate
A. His estimated profit for the year
B. His average working capital requirement
4. Q.24.C November 2016 – Working Capital
The management of Fast Ltd., desires to know the working capital
required with effect from 1st January 2001 to finance the production
programme. Percentage of various elements of cost to selling price are:
Materials – 50%
Labour – 20%
Overheads – 10%
You are informed that:
Raw materials remain the stores on an average for one month
before issue to production
Finished goods remain in the godown for two months before
sales
Each unit of production will be in process for one month
Credit allowed by creditors is one month and allowed to debtors
is two months
Selling price is Rs. 9 per unit
Production in 2001 is expected to be 1, 02,000 units.
Advise the management
5. Q.23.C November 2015 – Working Capital
Anand wishes to commence a new trading business and gives the
following information
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a) Total estimated sales per annum Rs. 6,00,000
b) His fixed expenses are estimated are Rs. 1000 per month and
variable expenses to 5% of turnover
c) He expects of fix a sale price for each product which will be 25%
in excess of his cost of purchase
d) He expects to turnover his stocks 4 times in a year
e) The sale and purchases will be evenly spread throughout the
year. All sales will be for cash but he expects one month’s credit
for purchase
Calculate his average working capital requirements
6. Q.24.C November 2014 – Working Capital
From the following information, prepare a statement showing the
estimated working capital requirements
Budgeted sales – Rs. 2,60,000 p.a
Analysis of cost and profit of each unit
Raw Materials Rs. 3
Labour Rs. 4
Overheads Rs. 2
Profit Rs. 1
Selling price per unit Rs. 10
It is estimated that
a) Pending use, raw materials, are carried in stock for three weeks
and finished goods for two weeks
b) Factor processing will take 3 weeks.
c) Suppliers will give five weeks credit and customers will require
eight weeks credit
d) It may be assumed that production and overheads occur evenly
throughout the year.
7. Q.21.C April 2014 – Working Capital
From the following information prepare statement showing the working
capital requirement.
Budgeted sales Rs. 2,60,000 p.a.
Analysis of one rupee sales : Re.
Raw material 0.30
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Direct labour 0.40
Overheads 0.20
Total cost = 0.90
Profit 0.10
Sales 1.00
If is estimated that
a. Raw materials are carried in stock for 3 weeks and finished
goods for 2 weeks
b. Factory processing will take 3 weeks
c. Suppliers will give 5 weeks credit
d. Customers will require 8 weeks credit.
8. Q.22.C April 2012 – Working Capital
From the following details you are required to make an assessment of the
average amount of marketing capital requirement of Meenakshi Marbles
Ltd.
Average Estimate for
period the first year
of credit Rs.
Purchase of material 6 weeks 26,00,000
Wages 1 1/2 Weeks 19,50,000
Overheads :
Rent, rate etc. 6 months 1,00,000
Salaries 1 month 8,00,000
Other overheads 2 months 7,50,000
Sales (Cash) – 2,00,000
Credit sales 2 months 6,00,000
Average amount of stock and work in
– 4,00,000
progress
Average amount of undrawn profit – 3,00,000
It is to be assumed that all expenses and income were made at even rate for
the year.
