(^192) Financial Management
(B) Current liabilities:
(i) Creditors, average 4 weeks: (1,04,000 ◊ Rs 80 ◊ 4/52) 6,40,000
(ii) Lag in payment of wages (1,04,000 ◊ Rs 30 ◊ 3/104) 90,000
Total current liabilities 7,30,000
(C) Net working capital: Current assets - Current liabilities 45,15,000
Add 10 per cent contingencies 4,51,000
Rs 49,66,500
Working notes
A full unit of raw material is required at the beginning of the manufacturing process
and, therefore, total cost of the material, that is, Rs 80 per unit has been taken into
consideration, while in the case of expenses, viz. direct labour and overheads, the unit
has been finished only to the extent of 50 pet cent. Accordingly, Rs 15 and Rs 30 have
been charged for direct labour and overheads respectively in valuing work-in-process.
- A newly formed company has applied for a loan to a commercial bank for financing
its working capital requirements. You are requested by the bank to prepare an estimate
of the requirements of the working capital for the company. Add 10 per cent to your
estimated figure to cover unforeseen contingencies. The information about the projected
profit and loss account of this company is as under:
Sales Rs 21,00,000
Cost of goads sold 5,30,000
Gross profit 5,70,000
Administrative expenses Rs 1,40,000
Selling expenses 1,30,000
2,70,000
Profit before tax 3,00,000
Provision for tax 1,00,000
Note: Cost of goods sold has been derived as follows:
Materials used 8,40,000
Wages and manufacturing expenses 6,25,000
Depreciation 2,35,000
17,00,000
Less stock of finished goods (10 per cent-nor yet sold) 1,70,000
15,30,000