Scribd
Upload
62 views4 pages

Unit V - Questions

Uploaded by

LeemaRosaline Simon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
62 views4 pages

Unit V - Questions

Uploaded by

LeemaRosaline Simon
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 4

UNIT V

WORKING CAPITAL FINANCE


1. Explain the factors which determine the working capital needs of the organisation.
2. Explain different methods of forecasting working capital requirements of a concern.
3.Peerless Ltd. is engaged in customer retailing. You are required to compute their working
capital requirements from the following information.
Projected annual sales ₹ 6,50,000
% of NP. to cost sales 25%
Average credit allowed to debtors 10 weeks
Average credit allowed by creditors 4 weeks
Average stock carrying (in terms of Sales Requirement) 8 weeks
Add 20% to allow for contingencies.
4. Sathyam Industries Ltd. gives the following adjusted Profit and Loss account.
₹ ₹
To materials used 1, 20,000 By Sales 2,50,000
To wages 20,000
To manufacturing expenses 30,000
(Including depreciation ₹ 10,000)
To office expenses 14,000
To selling expenses 12,000
To net profit 54,000
2,50,000 2,50,000
It is the company's policy to maintain the following stocks:
(a) Finished goods 1/2 month's sales
(b) Raw materials I month's consumption
(c) Work-in-process is equal to 1 month's production in terms of materials and ½
month's wages and manufacturing expenses
(d) Credit allowed to customers 3 months and credit allowed by suppliers 2 months.
(e) All expenses and wages are one month in arrear but selling expenses are paid 2
months in advance.
(f) A safety margin of 10% on total current assets is desirable. Prepare the working
capital requirements for the company.
5. From the following information extracted from the books of a manufacturing concern.
Compute the operating cycle in days
Period covered – 365 days; Average period of credit allowed by suppliers – 16 days
(₹ ‘000)
Average total of debtors outstanding 480
Raw material consumption 4,400
Total production cost 10,000
Total cost of goods sold for the year 10,500
Sales for the year 16,000
Value of average stock maintained:
Raw materials 320
Work-in-progress 350
Finished goods 260

6. Prepare an estimate of working capital requirement from the following information of trading
concern
a) Projected annual sales – 1,00,000 units;
b) Selling price = ₹ 8 per unit
c) % age of net profit on sales – 25%
d) Average credit period allowed to customers – 8 weeks
e) Average credit period allowed by customers – 4 weeks
f) Average stock holding in terms of sales requirement – 12 weeks
g) Allow 10% for contingencies

7.XLR Ltd., issued commercial paper as per the following details:


Date of issue 17.1.2000
Date of maturity 17.4.2000
No. of days 90
Interest rate 11.25% p.a.
Calculate the net amount received by the company on the issue of commercial paper?

8. HC Ltd., issues a 90 days commercial paper of a face value of ₹ 100 at ₹ 98.50. The credit
rating expenses are 0.5% of the size of the issue, issuing and passing agent charges being
0.35% and stamp duty 0.5%. Compute the cost of commercial paper?
CASH MANAGEMENT
9. Summarised below are the income and expenditure forecasts of Gemini Ltd for the month
of March to August 2007:
Months Sales Purchases Wages Manufac- Office Selling
(All (All credit) turing expenses expenses
Credit) expenses

March 60,000 36,000 9,000 4,000 2,000 4,000


1,500
April 62,000 38,000 8,000 3,000 2,500 5,000
May 64,000 33,000 10,000 4,500 2,000 4,500
June 58,000 35,000 8,500 3,500 1,000 3,500
July 56,000 39,000 9,500 4,000 1,500 4,500
August 60,000 34,000 8,000 3,000 4,500

Additional information:
i) Plant costing ₹16,000 is due for delivery in July payable 10% on delivery and
the
balance after three months
ii) Advance tax of ₹8,000 is payable in March and July each
iii) Period of credit allowed i) by supplier 2 months and ii) to customers1 month
iv) Lag in payment of manufacturing expenses ½ month
v) Lag in payment of all other expenses 1 month
You are required to prepare a cash budget for three months starting on 1st May 2007 when
there is a cash balance of ₹8,000

10. The annual cash requirement of SLR Ltd is ₹ 10,00,000. The company has marketable
securities in lot sizes of ₹ 50,000, ₹, 1,00,000 ₹ 2,00,000 ₹ 2,50,000 and ₹ 5,00,000, Cost of
conversion of marketable securities per lot is ₹1000. The company can earn 5% annual yield
on its securities.
You are required to prepare a table indicating which lot size will have to be sold by the
company. Also compute the optimum cash balance under the Baumol models.

11. Karthika Ltd.’s, monthly cash requirement is ₹ 1,80,000. Every month cash is procured
by selling marketable securities. The fixed cost per transaction is ₹100. The firm gets annual
interest at 12% on its marketable securities. You are required to use the EOQ model and find
out (a) Optimal cash balance (b) Average cash balance (c) No. of times marketable securities
gets will have to be converted into cash.
RECEIVABLE MANAGEMENT
12. A company plans to extend credit facilities to the following categories of customers,
(A) Customers with a 10% risk of non-payment and
(B) Customers with a 30% risk of non-payment.
The incremental sales expected in the case of category (A) are ₹ 40,000 while in the
case of category (B) they are ₹ 50,000.
The cost of production and selling costs are 60% of sales while collection cost amount
to 5% of sales in the case of category (A) and 10% of sales in the case of category (B).
You are required to advise the firm about extending credit facilities to each of the
above
categories of customers.
13. Sun Star Ltd. Propose to liberalize its credit facilities and also to increase its sales. The
liberalized credit policy will bring additional sales of ₹ 3,00,000. The variable cost will be
60% of sales and there will be 10% risk for non-payment and 5% collection costs. Will the
company benefit from the new credit policy? Or not?
INVENTORY MANAGEMENT
14. Two components A and B are used as follows :

Average consumption 40 units

Normal usage 50 units per week each

Minimum usage 25 units per week each

Maximum usage 75 units per week each

Re-order quantity A : 300 units


B : 500 units

Re-order period A : 4 to 6 weeks


B : 2 to 4 weeks

Maximum lead time for A : 1 day


emergency purchases B : two days

Calculate for each component:


(a)Re-order level (b) Minimum level (c) Maximum level (d) Average stock level and
(e) Danger level
15. A soap manufacturing company, manufacturing there products viz A.B.C In respect of
which the following particulars are given.

Raw Usage per Re-order Price per Delivery Order Min. level
Material unit of quantity kg. period level (kg.)
Product (kg.) (paise) (weeks) (kg.)
(kg.)

A 10 10,000 10 1 to 3 8000 -
B 4 5,000 30 3 to 5 4750 -
C 6 10,000 15 2 to 4 - 2000
Weekly production varies from 175 to 225 units, averaging 200. Calculate
(a) Minimum stock of A, B & C
(b) Maximum stock of A,B & C
(c) Re-order level of A,B & C
(d) Average stock of A,B & C

You might also like