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154 Corporate Finance BRILLIANT’S

Solution:
(a) Average period of raw material holding
Average stock of raw material 1,80,000
= =  150days
Average daily consumption 1,200
(b) Credit period available to customers
Average Debtors 1,50,000
= =  75days
Average daily Sales 2,000

(c) Average period of finished goods holding
Average Stock of finished goods 54,000
= =  30days
Average daily Cost of Sales 1,800
(d) Average period of converting raw materials into finished goods

Average Stock of Work-in-Progress 1,00,000
= =  56days
Average daily Factory Cost 1,800
Note: In the absence of information relating to average daily factory cost, cost of finished
goods has been used.
(e) Working Capital Cycle
= 150 + 75 + 30 + 56 – 100 = 311 – 100 = 211 days 

REVIEW QUESTIONS
Q.1. What is working capital? Explain the concept in brief.
d{Hª$J H¡${nQ>b Š`m h¡? AdYmaUm H$m g§{jßV dU©Z H$s{OE& [See Q.14]
Q.2. What are the symptoms of poor working capital management?
Iam~ d{Hª$J H¡${nQ>b _¡ZoO_|Q> Ho$ bjU Š`m h¢? [See Q.17]
Q.3. Explain the determinants of working capital.
d{Hª$J H¡${nQ>b Ho$ {ZYm©aH$m| H$mo g_PmB`o& [See Q.15]


PRACTICAL QUESTIONS
2.3.1. The cost sheet of PQR Ltd. provides following data:
Amount
Per Unit (in `)
Raw Materials Cost 50
Direct Labour Cost 20
Overhead Cost (including Depreciation of ` 10) 40
Total Cost 110