,• 9~'-.-.P.ROF(i~.

:STAT~NT SHO~~G THE ~EQUIR

~) ~ •
The amount of working capital may be estimated in the unqer-mentioned format :
. XYZ Industries Ltd.
Statement of Working Capital Requirem~nt for the period - -
InstallecJ Capacity .......... units •Proposed •••• ••.... units
t .......... Sales P.A. Utilisation •••... ••·· Sales
t f '
-
. .
Current
' -~
Aasets
1. Stock of Raw Materials Units X Rate X Period of holding xx
2. Stock ofWIP
Raw Materials ' Units X RateProcessing Period
X xx
Labour .
I
. Units X
I
Rate X :processing Period X 2
l
- xx
,I 1 .
.....
Overheads Units X Rate x Processing Period X 2 -xx
. .
3. Stock of Finished, Goods I
Raw Materials
~

Units X Rate X Period of holdipg xx

Labour Units X Rate X Piriod of holding xx
Overheads Units X Rate X Period of ·holding -xx
4. Debtors (at S.P.) OR Units X S.P. X Period of Credit ~ . xx
.
D~bton·(at Coat)
Raw Materials I Units X Rate X Period of Credit xx
Labour ( lJnitS X Rate X Pe·riod of Credit
1 xx
Overheads Units X Rate X Period of Credit .XX·
- -xx
5. Prepai~ Expenses . Units X Rate X Prepayment Period xx
6. Advance to Suppliers xx
7. Cash &·Bank . .
. '
-xx
'
Total (A) I
xx
Lesa : Current Liabilities (

1. Creditors for Materials Units X Rate· x Period of Credit xx

2 .. Lag in Payment·W~ges • U.nits X Rate X Lag in Payment xx
Overheads. . Units X Rate X Lag in Payment . xx
3.\/ Advance from customers -xx
Total (B) - ,
I
xx
'
Net Current Assets xx
Add : Margin of Saf~ty . xx
Working Capital Required
.. '
-xx
xx
 - -- - - - ... ·-·•--- •u""1 .ua·11 1g urga n1sa non \
. 11l~ trat ion : 3 (Sim ple Problem) · . • --
. From the follo ping information pertaining to· Ambica Ltd., pr~pa~e
Cap ital requirements : a statement showing the. Working
11

•
•. . :. .. . · .· .
•• Bud gete d Sales , f 2,60,000 per annum ~ • ' I

. . ,.
·~ An~ lysis of Sales (per unit) :
; Raw Materials f 3
Dire ct Labour • f 4
Overheads f 2"
Tota l ·Cost ~-9
Prof it f 1 '--
Sale Price ! 10
It is estim ated that:
1. Raw materials ~em.ain in stock for three weeks and finished goo4s
for two weeks:
2. F ~ctory ,proce~~ing takes ~hree weeks. .- • •
3. Supp liers allow five weeks" credit. • ,
4. Cust ome rs are allowed eight we~ks' credit.
Assw ne that production and overheads accrue evenly throug~out .th~ year ......
..
\
 - - -p-- - --. .........,.__ .... ..,&.4- ..&-&.4 ~• -&&"1,. .&.AA A .A.Vf:,.1.'-'~~ .l.) .lE,J-.lV.l""'U•

Wustration : 6. (P1ovision for Contingencies) ..

Estimate the working capital . requirements from the following annual figures by adding .5% for
contingencies. .
-
,
1.. Stock of Finished Products and Stores & Materials •
• ~ · 13,000 .. -

2. Credit allowe<J : . -•
Domestic Sales : 6 weeks •
• ~ 3,12,000
•
..
:Export Sales : _1
.
½weeks • ~ 78,000

3. Advance Payment :
Sundry .-Expenses (Quarterly Advance) •
• ~ 8,000·
.
.·11".-\',.
4. Outstanding : ·.;
.
·1 • ~ 2,60,000
Wages :.I 2weeks.. •
 ,•"
' .. <t,
Stores & Materials : 1 ½~onths • . .,_ ~"
•
• t 2,08,000
..
\

R~nt & Royalties - 6 months

' 10,000
•
•
>

~leric al Staff : ½~onths 62,400

'
•
•

.1
Manager : months
' 4,800
•
2 •

.
• Miscellaneous Expenses : 1 ½months •

' 48,000
• .
DI~ tion : 7 (Cont ingen cy margi n given )
Hira construction Aids Pvt. Ltd. is a manufacturer of cement. The annual accounts of the company
reveal ed the information as follows : , •., . . •. ·w· • .. -

. Custom ers were allowed three months credit period. Wages are paid after lS days _when ·they become
~ue. Advert ising expenses are paid 6 months in advance. Manufacturing expenses are paid after a month.
an
Suppli ers of manufacturing items allows one month's credit. Administrative expenses are paid with
average time lag of one month. The cash balance is , 50,000.· Finished goods are kept in stock for one and·
half month s whereas raw material stock is kept for two months. Contingency margin is 10%' and othtr details
are as follow s : • •- -. :.!.
,}f ( ' in lacs)

Sales : · , 20.00
Raw Materi als : -- ,. 6.00
Manuf acturin g Expenses • : . , • 6.00
Wages . : , 4.80
Admin istrativ e Expenses . : , 2.40 t
Adver tising Expenses : , 1.00
Gross profit 20% on sales. 1
• •

Estima te the wor}cing capital requirement of tne co~pan y.

•
..
'#
 ., . ueotors are valued at cash cost.
ntustra tion : 12 (Purc~ases on Cash & Credit Given)
At the beginning of current year, the Board of Directors of Karishma Ltd. wishes to know the amount
of working capital that will be re·quired to meet the programiµe of activity·which they have planned for the
year 2016-17.
Following information is available: . ,•
•• 1. Production during the previous year was 1,20,00~ units . .It is planne~ that this level of activity .
should be maintai~ed during the present year.
2. The expected ratios of cost to selljng price are : •
Raw Materials 40%
Direct Wages· 30%
Overhea
.
ds 20% .
\ . \
3. Raw materials are expected to remai~ in stores for an averag~. period of one month before issuing
for _production.
4. Finished goods are to stay in warehouse on an average for two· months before being. sold to
customers.
5. Each unit of production will be in process
. for an average .period of _one month.
~. .
6. Credit allowed by- supplie;s fr_om ~he date of.delivery 9f materials is one month.
7. Debtors-are allowed two months credit fr:om the date of sale.
8. Selling price is t 15. per unit. _
9. The company wants to maintain t ~,i5,500 cash balance.
10. Calculate debtors on cost basis.
•11. There is regularyroduction and sales cycle.
12. 20% of the purchases wil~ be on cash pasis.
13. puring jhe p_rocessing period,_ lab_our and overh~ads ace~~ evenly.. '
 II' I r . , ,
'Worki.ng Capital - Estimation ofRequir~ments
' ~

J
.,,.
•

th. -
14. Time lag in payment of wages and overheads is -one mon
adopt 15% safety margin on net working capi/#/, before computing saf ety
1.5. The company wants to • • •

margin. • · • J • .'
•

•
• ~ .... 1 • .,.,.; nn •
\
-~
 _1 llUStration : 13 (Cash sales and credit sales given)
Miss Lovely wants to start a New Tradmg Business and provides you.with the following information
1. Projected annual
,, . sales~ 15,.00,000/-. .
2. Expects that sales.and purchases will evenly spread throughout the year.
3. Average gross profit to sales io%.
4. Average stock holding in terms of sales requirements one month.
5 .. Average credit period allowed to Debtors two months.
6. Average credit period allowed by Creditors one month.
7. 25% of sales for cash and balance on credit. •
8. Cash on hand estimated at~ 17,000/-.
"'
you are required to estimate Working Capital.