Working Capital Management^195
Solution
Statement showing determination of net working capital(A)Current assets:
Cash balance
Rs 35,000
Inventories:
Raw materials: Opening stock Rs 1,40,000
Add purchases 7 05,000
Less closing stock 1,25,00
Annual consumption 7,20,000
Two months requirement: (Rs 7,20,000 ◊ 2/12) 1,20,000
Work-in-process: (Rs 10,80,000 ◊ 1/24) 45,000
Finished goods: (Rs 10,80,000 ◊ 1/12) 90,000
Debtors: (Rs 10,80,000 ◊ 1/12) 90,000@
Total current assets 3,80,000(B)Current liabilities:
Trade creditors: (Rs 7,05,000 ◊ 1/24) 29,375
Advance received from debtors 15,000
Total current liabilities 44,375(C)Net working capital (A-B) 3,35,625
@ It is assumed that there is neither opening nor closing stock of finished stock and,
therefore, cost of sales is Rs 10,80,000 excluding depreciation.Monthly expenditure is excluded as the cost of production includes it (Rs 7.2 lakh, raw
materials + Rs 3.6 lakh, other expenses @ Rs 30,000 per month).