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Chapter wise Test (2009)
Treasury and Cash Management
Instructions
- All questions are compulsory.
- Test Duration will be 35 Minutes, starting from 11:00 AM to 11:35 AM
- 5 minutes reading time will be provided before 11, i.e. question paper will be
shared by 10:55 AM.
- Share your scanned answer sheets by 11:40 on below link
https://forms.gle/wLRZWiTvMELNpCeC6
1. [5 Marks] You are given below the Profit & Loss Accounts for two years for a company:
Profit and Loss Account
Year 1 Year 2 Year 1 Year 2
(Rs.) (Rs.) (Rs.) (Rs.)
To Opening 32,00,000 40,00,000 By Sales 3,20,00,000 4,00,00,000
stock
To Raw 1,20,00,000 1,60,00,000 By Closing 40,00,000 60,00,000
materials stock
To Stores 38,40,000 48,00,000 By Misc. 4,00,000 4,00,000
Income
To 51,20,000 64,00,000
Manufacturing
Expenses
To Other 40,00,000 40,00,000
Expenses
To 40,00,000 40,00,000
Depreciation
To Net Profit 42,40,000 72,00,000 - -
3,64,00,000 4,64,00,000 3,64,00,000 4,64,00,000
Sales are expected to be Rs. 4,80,00,000 in year 3.
As a result, other expenses will increase by Rs. 20,00,000 besides other charges.
Only raw materials are in stock. Assume sales and purchases are in cash terms
and the closing stock is expected to go up by the same amount as between year 1
and 2. You may assume that no dividend is being paid. The Company can use 75%
of the cash generated to service a loan. COMPUTE how much cash from operations
will be available in year 3 for the purpose? Ignore income tax.
2. [10 Marks] A company was incorporated w.e.f. 1st April, 2021. Its authorised capital
was Rs. 1,00,00,000 divided into 10 lakh equity shares of Rs. 10 each. It intends to
raise capital by issuing equity shares of Rs. 50,00,000 (fully paid) on 1st April.
Besides this, a loan of Rs. 6,50,000 @ 12% per annum will be obtained from a
financial institution on 1st April and further borrowings will be made at same rate of
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interest on the first day of the month in which borrowing is required. All borrowings
will be repaid along with interest on the expiry of one year. The company will make
payment for the following assets in April.
Particulars (Rs.)
Plant and Machinery 10,00,000
Land and Building 20,00,000
Furniture 5,00,000
Motor Vehicles 5,00,000
Stock of Raw Materials 5,00,000
The following further details are available:
(1) Projected Sales (April-September):
(Rs.)
April 15,00,000
May 17,50,000
June 17,50,000
July 20,00,000
August 20,00,000
September 22,50,000
(2) Gross profit margin will be 25% on sales.
(3) The company will make credit sales only and these will be collected in
the second month following sales.
(4) Creditors will be paid in the first month following credit purchases.
There will be credit purchases only.
(5) The company will keep minimum stock of raw materials of Rs. 5,00,000.
(6) Depreciation will be charged @ 10% per annum on cost on all fixed
assets.
(7) Payment of miscellaneous expenses of Rs. 50,000 will be made in April.
(8) Wages and salaries will be Rs. 1,00,000 each month and will be paid
on the first day of the next month.
(9) Administrative expenses of Rs. 50,000 per month will be paid in the
month of their incurrence.
(10) No minimum cash balance is required.
You are required to PREPARE the monthly cash budget (April-September), the
projected Income Statement for the 6 months period and the projected Balance Sheet
as on 30th September, 2021.
CA Aman Agarwal https://t.me/costingwithcaaman
3. [5 Marks] A firm maintains a separate account for cash disbursement. Total
disbursement are Rs. 1,05,000 per month or Rs. 12,60,000 per year.
Administrative and transaction cost of transferring cash to disbursement
account is Rs. 20 per transfer. Marketable securities yield is 8% per annum.
DETERMINE the optimum cash balance according to William J. Baumol model.
