Page 155 - Corporate Finance PDF Final new link

NPP

BRILLIANT’S Working Capital Management 155

Profit 20
Selling Price 130
Additional information:
Average raw material holding period is one month. Average material in progress is for
half month. Credit allowed by suppliers is one month, credit allowed to customers is also
one month. Average time lag in payment of wages is 10 days; average time lag in payment
of overheads is 20 days; 20% of the sales are on cash basis; Cash balance expected to be `
1,00,000; Finished goods lie in the warehouse is on an average for one month.
You are required to prepare a statement showing the working capital needed to finance
an annual level of activity of 54,000 units of output. State your assumptions, clearly.
[Ans. Net WC = ` 3,45,000]
2.3.2. The following annual figures related to Neeraj Co.:

Particulars `
Sales (at two month's credit) 36,00,000
Materials consumed (suppliers extend two month's credit) 9,00,000
Wages paid (monthly in arrear) 7,20,000
Manufacturing expenses outstanding at the end of
the year (cash expenses are paid one month in arrear) 80,000
Total administrative expenses paid as above 2,40,000
Sales promotion expenses, paid quarterly in advance 1,20,000

The company sells its production on gross profit of 25% counting depreciation as part of
the cost of production. It keeps one month's stock each of raw material and finished goods
and a cash balance of ` 1,00,000.
Assuming a 20% safety margin, work out the working capital requirement of the company
on cash basis. Ignore work-in-process. [Ans. Net WC = ` 7,20,000]


""AkmZr ~Zo ahZm AÀN>m h¡, H$‘ go H$‘ AkmZ Vmo Bg‘| AmnH$m hmoVm
h¡, ¶o à‘m{UH$ h¡, ¶hr gM, dmñV{dH$Vm Am¡a B©‘mZXmar h¡&''