Page 155 - DMGT409Basic Financial Management

Basic Financial Management

Notes Solution:

Statement showing working capital requirements
Amount (`)
A. Current Assets

(i) Stock of materials for 1 month [i.e. 4 weeks]
⎡ 1,04,000units × ` 80 × 4weeks⎤
⎢ ⎥ 6,40,000
⎣ 52weeks ⎦
(ii) Work in progress for 2 weeks
⎡ 1,04,000 80 2weeks⎤
×
×
(a) Material ⎢ ⎥ × 50% completion 1,60,000
⎣ 52weeks ⎦

⎡ 1,04,000units × ` 30 2weeks⎤
×
(b) Labour ⎢ ⎥ × 50% completion 60,000
⎣ 52weeks ⎦
⎡ 1,04,000 units × ` 60 2 weeks ⎤
×
(c) Overheads ⎢ ⎥ × 50% completion 1,20,000
⎣ 52 weeks ⎦
(iii) Finished goods for 1 month (ie. 4 weeks)
×
⎡ 1,04,000 80 × 4weeks⎤
(a) Material ⎢ ⎥ 6,40,000
⎣ 52weeks ⎦
⎡ 1,04,000 30 × 4weeks⎤
×
(b) Labour ⎢ ⎥ 2,40,000
⎣ 52weeks ⎦
⎡ 1,04,000 60 × 4weeks⎤
×
(c) Over heads ⎢ ⎥ 4,80,000
⎣ 52weeks ⎦
(iv) Debtors for 2 months (i.e. 8 weeks)
×
⎡ 78000units × ` 170 8weeks⎤
⎢ ⎥ 20,40,000
⎣ 52weeks ⎦
(v) Cash in hand and at Bank (Given) 3,65,000
Total investments in Current Assets (A) 47,45,000
B. Current Liabilities

(i) Creditors for one month
1 month’s purchase of Raw – Materials i.e.
⎡ 1,04,000 × ` 80 × 4weeks⎤
⎢ ⎥
⎣ 52weeks ⎦ = 6,40,000
(ii) Average time-lag in payment of expenses:
⎡ 1,04,000 60 × 4weeks⎤
×
(a) Overheads (a month) ⎢ ⎥ = 4,80,000
⎣ 52weeks ⎦
×
×
⎡ 1,04,000 30 1½ weeks⎤
(b) Labour (1½ weeks) ⎢ ⎥ = 90,000
⎣ 52weeks ⎦
Total estimate of current Liabilities (B) 12,10,000

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