Page 145 - Corporate Finance PDF Final new link

BRILLIANT’S Working Capital Management 145

 48,000 1.5 
(vi) Miscellaneous expenses =   6,000
 12 
Total estimate of current liabilities 27,300
(C) Net Working Capital
(i) Current assets - Current liabilities (A - B) 25,950
(ii) Add 10% Contingency allowance 2,595
Average amount of working capital required 28,545

Notes: / ZmoQ²>g…
(i) Since average amount of stock is readily given, no further calculation is required about
stock. / M§y{H$ ñQ>m°H$ H$s Am¡gV am{e nhbo go Xr J`r h¡ Bg{bE ñQ>m°H$ Ho$ ~mao _| AmJo JUZm H$aZm Amdí`H$
Zht h¡&
(ii) Un-drawn profit is not considered for calculating working capital.
AàmßV bm^ d{Hª$J H¡${nQ>b H$s JUZm Ho$ {bE {dMma Zht {H$`m OmVm h¡&

Illustration 2.3.2 NPP
A Proforma Cost Sheet of RR & Co. Ltd, provides the following information. You are required
to estimate the working capital needed to finance a level of activity of 52,000 units of production:
RR E§S> H§$nZr {b{_Q>oS> H$s EH$ àmo’$m°‘m© H$m°ñQ> erQ> {ZåZ{b{IV gyMZm àXmZ H$aVr h¡& AmnH$mo CËnmXZ H$s
52,000 BH$mB`m| H$s J{V{d{Y`m| Ho$ ñVa H$mo \$m`Z|g H$aZo Ho$ {bE Amdí`H$ d{Hª$J H¡${nQ>b H$m AZw_mZ bJmZm h¡&
Cost per unit (`)
H$m°ñQ> na ¶y{ZQ> (`)
Raw Materials / am° ‘Q>o[a¶b 40
Direct Labour / S>m¶ao³Q> bo~a 15

Overheads (excluding depreciation) / AmodahoS²>g (S>o{à{gEeZ N>mo‹S>H$a) 30
Total Cost / Q>moQ>b H$m°ñQ> 85
Profit / àm°{’$Q> 30
Selling Price / goqbJ àmBg 115

Additional information: / A{V[aŠV gyMZm…
(i) Average raw material in stock: one month. / ñQ>m°H$ _| Am¡gV am° _Q>o[a`b… EH$ _mh&
(ii) The materials are in process on an average for half a month. The degree of completion is
50% in respect of all other elements of cost.
gm_{J«`m± Am¡gV N>… _mh na à{H«$`m _| h¢& nyU©Vm H$m A§e bmJV Ho$ AÝ` g^r VËdm| Ho$ g§~§Y _| 50% h¡&
(iii) Average finished goods in stock: one month. / ñQ>m°H$ _| Am¡gV {\${ZíS> JwS²>g… EH$ _mh&
(iv) Credit allowed by suppliers: one month. / gßbm`g© Ûmam AZw_{V {X`m J`m H«o${S>Q>… EH$ _mh&