Working Capital Management

Q.1) A pro forma cost sheet of a company provides the following data
Costs(per
unit)
Raw
Material
Direct labor
Overheads
Total
Cost/unit
Profit
Selling
Price

Rs
52
19.5
39
110.5
19.5
130

The following is the additional information available

Average Raw Material in stock: 1 Month, Average material in Progress : Month,
Credit Allowed by Suppliers : 1 Month, Credit Allowed to debtors : 2 Months, Time
Lag in Payment of wages : 1.5 Weeks Time lag in Payment of OH : 1 Month, One
fourth Sales on Cash Basis. Cash balance expected Rs 120000
You are required to prepare a statement showing the working capital needed to
finance a level of activity of 70,000 units of output

Q.2) A firm has applied for working capital finance from a commercial bank. You are
requested by bank to prepare estimate of working capital requirements of the firm.
You may add 10% to your estimate figure to account for exigencies

Sales
COGS
Gross Profit
Admin Expenses
Selling Expenses
PBT
Tax Provision
PAT

Rs
22470
00
16371
00
60990
0
14980
0
13910
0
32100
0
10700
0
21400

Material Used
Wages & other Mgf
Expenses
Depreciation
Less: Stock of Finished
Goods
(10% products not
sold)
COGS

89880
0
66875
0
25145
0
18190
00
18190
0
16371
00

The figure given above relate only to the goods that have been finished and not to
work in progress; goods equal to 15% of the years production(units) are in
progress on an average requiring full material but only 40% of other expenses. The
firm has a policy of keeping two months consumption of material in stock. All
expenses are paid one month in arrears. Suppliers of material grant one and half
month credit, Sales are 20% cash while remaining sold on two months credit. 70%
of Tax has to be paid in advance in quarterly instalments

Q.3) The relevant financial information for Xavier Ltd for the year ended 2015 is
given below
Profit & Loss Account
data

Sales

Millions
80

CoGS

56

Balance Sheet
data

Inventory
Account
Receivable
Account
Payable

Begin
9

Million
s
Endin
g
12

12

16

10

2015

What is the length of operating cycle? Assume 365 days a year

Q.4) Following data has been extracted from financial statement of company

Rs
Million
7318
933
5363
6710
253
344
642
548
79
446
77
361

Credit Sales
Raw Material Consumed
Cost of Production
CoGS
Opening Raw material
Closing Raw material
Opening WiP
Closing WiP
Opening Finished Goods
Closing Finished Goods
Opening Debtors
Closing Debtors
Other Information
Credit period allowed by
60
suppliers
days
Present Investment in NWC
3055
Cost of production = Raw material+ labor+ production OH
CoGS = Cost of production + Other OH
Assuming 360 days in year
a) Determine the operating cycle period
b) Working capital Required based on it
c) Comment on whether there is improvement in management of working
capital