Question

firm has applied for working capital finance from a commercial bank. Estimate the working capital requirements. You can add 10% to estimated figures for exigencies.
Sales - 2,247,000
CoGS - 1,637,100
GP - 609,900
Admin expenses - 149,800
Selling exp - 139,100
Profit before tax - 321,000
Tax provision - 107,000
PAT - 214,000
COGS Material used - 898,800
Wages and other manf. Exp - 668,750
Depreciation - 251,450
Less: stock and finished goods (10% product not yet sold) - 181,900

The above figures are related to finished goods and not for WIP, 15% of year’s production are in progress on an average requiring full material but only 40% of other expenses. The firm has policy of keeping two months consumption of material in stock. All expenses are paid one month in arrear. Suppliers give one and half month credit, 20% sales are in cash, credit period allowed is two months. 70% of income tax has to be paid in advance.

Answer 1

Working Capital Requirment
CURRENT ASSETS
A)inventory
a)Raw Material			176235
b)wip
	material	158612
	all other exp	64955	223567
c) Finished Goods			181900	581702
B)Debtors				299600
C)Cash				449400
CURRENT LIABILITIES
D)Creditors
a) Adm.exp			14686
b)selling exp			11592
c)income tax			3210
d)material			132176
e)wages and other man exp			59663	221327
working capital requirement (A+B+C-D)				1109375
ADD= Exigencies				110937.5
Total Working capital Requirement				1220312
notes
1.admin exp conidered for finished goods & wip Working Capital Requirment CURRENT ASSETS A)inventory a)Raw Material =(898800/85%)*2/12 b)wip material =(898800/85%)*15% all other exp =+(((668750+251450)/85%)*15%)*40% =+C8+C7 c) Finished Goods 181900 =+D9+D8+D5 B)Debtors =(2247000*80%)*2/12 C)Cash =2247000*20% CURRENT LIABILITIES D)Creditors a) Adm.exp =(149800/85%)*1/12 b)selling exp =139100*1/12 c)income tax =10700*30% d)material =(898800/85%)*1.5/12 e)wages and other man exp =+(668750*1/12)+((668750/85%)*15%)*40%*1/12 =SUM(D18:D22) working capital requirement (A+B+C-D) =+E9+E12+E14-E22 ADD= Exigencies =+E24*10% Total Working capital Requirement =+E24+E25 notes 1.admin exp conidered for finished goods & wip